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					                     UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                                          Washington, D.C. 20549
                                                              FORM 10-K
                                     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                                        OF THE SECURITIES EXCHANGE ACT OF 1934
                                             For the fiscal year ended December 31, 2011
                                                 Commission File Number: 001-34139

                        Federal Home Loan Mortgage Corporation
                                                (Exact name of registrant as specified in its charter)
                                                                  Freddie Mac
  Federally chartered corporation              8200 Jones Branch Drive                      52-0904874            (703) 903-2000
  (State or other jurisdiction of              McLean, Virginia 22102-3110                  (I.R.S. Employer      (Registrant’s telephone number,
  incorporation or organization)               (Address of principal executive              Identification No.)   including area code)
                                               offices, including zip code)
                                    Securities registered pursuant to Section 12(b) of the Act: None
                                      Securities registered pursuant to Section 12(g) of the Act:
                                       Voting Common Stock, no par value per share (OTC: FMCC)
                        Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCI)
                              5% Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCKK)
                       Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCG)
                             5.1% Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCH)
                            5.79% Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCK)
                        Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCL)
                       Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCM)
                       Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCN)
                            5.81% Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCO)
                              6% Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCP)
                        Variable Rate, Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCCJ)
                             5.7% Non-Cumulative Preferred Stock, par value $1.00 per share (OTC: FMCKP)
                  Variable Rate, Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCCS)
                      6.42% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCCT)
                       5.9% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCKO)
                     5.57% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCKM)
                      5.66% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCKN)
                      6.02% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCKL)
                      6.55% Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCKI)
              Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (OTC: FMCKJ)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.           Yes n     No ≤
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n          No ≤
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ≤ No n
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ≤ Yes n No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ≤
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act.
                                  Large accelerated filer n                                            Accelerated filer ≤
           Non-accelerated filer (Do not check if a smaller reporting company) n                   Smaller reporting company n
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).             Yes n        No ≤
The aggregate market value of the common stock held by non-affiliates computed by reference to the price at which the common equity
was last sold on June 30, 2011 (the last business day of the registrant’s most recently completed second fiscal quarter) was $227.4 million.
As of February 27, 2012, there were 649,733,472 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
                                                                   TABLE OF CONTENTS

PART I
Item 1.        Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ............................                        1
Item 1A.       Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     ............................                       45
Item 1B.       Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              ............................                       77
Item 2.        Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ............................                       77
Item 3.        Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        ............................                       77
Item 4.        Mine Safety Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           ............................                       77
PART II
Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
           Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     78
Item 6.  Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            81
Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . .                                                82
                Mortgage Market and Economic Conditions, and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      82
                Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      85
                Consolidated Balance Sheets Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       108
                Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              127
                Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    174
                Fair Value Measurements and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         182
                Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     187
                Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              188
                Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         189
                Risk Management and Disclosure Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 192
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              194
Item 8.  Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         199
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . .                                                315
Item 9A. Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            315
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         318
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            322
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              330
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . .                                                        358
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . .                                     360
Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    365
PART IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      366
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    367
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   368
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      E-1




                                                                                     i                                                                  Freddie Mac
                                                             MD&A TABLE REFERENCE
Table   Description                                                                                                                                                Page

 —      Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       81
  1     Total Single-Family Loan Workout Volumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     4
  2     Single-Family Credit Guarantee Portfolio Data by Year of Origination . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 7
  3     Credit Statistics, Single-Family Credit Guarantee Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        8
  4     Mortgage-Related Investments Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                26
  5     Affordable Housing Goals for 2010 and 2011 and Results for 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               35
  6     Affordable Housing Goals and Results for 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     36
  7     Quarterly Common Stock Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  78
  8     Mortgage Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          82
  9     Summary Consolidated Statements of Income and Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . .                                        85
 10     Average Balance, Net Interest Income, and Rate/Volume Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              86
 11     Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     87
 12     Derivative Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         91
 13     Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    93
 14     Non-Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      94
 15     REO Operations Expense, REO Inventory, and REO Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 95
 16     Composition of Segment Mortgage Portfolios and Credit Risk Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 98
 17     Segment Earnings and Key Metrics — Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        99
 18     Segment Earnings and Key Metrics — Single-Family Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               102
 19     Segment Earnings Composition — Single-Family Guarantee Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   103
 20     Segment Earnings and Key Metrics — Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       106
 21     Investments in Available-For-Sale Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               109
 22     Investments in Trading Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          109
 23     Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets . . . . . . . . . . . . . . . . . .                                      110
 24     Additional Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets . . . . . . . . . .                                           111
 25     Total Mortgage-Related Securities Purchase Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     112
 26     Non-Agency Mortgage-Related Securities Backed by Subprime First Lien, Option ARM, and Alt-A Loans
           and Certain Related Credit Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           114
 27     Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM, Alt-A and Other Loans . . . .                                                       115
 28     Net Impairment of Available-For-Sale Mortgage-Related Securities Recognized in Earnings. . . . . . . . . . . . .                                           116
 29     Ratings of Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM, Alt-A and Other
           Loans, and CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       118
 30     Mortgage Loan Purchase and Other Guarantee Commitment Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   120
 31     Derivative Fair Values and Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            121
 32     Changes in Derivative Fair Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            122
 33     Reconciliation of the Par Value and UPB to Total Debt, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         123
 34     Other Short-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        124
 35     Freddie Mac Mortgage-Related Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                125
 36     Freddie Mac Mortgage-Related Securities by Class Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          126
 37     Issuances and Extinguishments of Debt Securities of Consolidated Trusts . . . . . . . . . . . . . . . . . . . . . . . . . .                                126
 38     Changes in Total Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          127
 39     Repurchase Request Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          130
 40     Loans Released from Repurchase Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   131
 41     Mortgage Insurance by Counterparty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               134
 42     Bond Insurance by Counterparty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             135
 43     Non-Agency Mortgage-Related Securities Covered by Primary Bond Insurance . . . . . . . . . . . . . . . . . . . . . .                                       136
 44     Derivative Counterparty Credit Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                138
 45     Characteristics of the Single-Family Credit Guarantee Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         142
 46     Single-Family Loans Scheduled Payment Change to Include Principal by Year at December 31, 2011 . . . . .                                                   145
 47     Serious Delinquency Rates by Year of Payment Change to Include Principal . . . . . . . . . . . . . . . . . . . . . . . .                                   145
 48     Single-Family Scheduled Adjustable-Rate Resets by Year at December 31, 2011 . . . . . . . . . . . . . . . . . . . . .                                      146
 49     Serious Delinquency Rates by Year of First Rate Reset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      146
 50     Certain Higher-Risk Categories in the Single-Family Credit Guarantee Portfolio . . . . . . . . . . . . . . . . . . . . .                                   149
 51     Single-Family Home Affordable Modification Program Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                153
 52     Single-Family Refinance Loan Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                155
 53     Single-Family Loan Workouts, Serious Delinquency, and Foreclosures Volumes. . . . . . . . . . . . . . . . . . . . . .                                      157
 54     Reperformance Rates of Modified Single-Family Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          158

                                                                                   ii                                                                   Freddie Mac
Table   Description                                                                                                                                                  Page

 55     Single-Family Serious Delinquency Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  159
 56     Credit Concentrations in the Single-Family Credit Guarantee Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                160
 57     Single-Family Credit Guarantee Portfolio by Attribute Combinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                161
 58     Single-Family Credit Guarantee Portfolio by Year of Loan Origination . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 163
 59     Multifamily Mortgage Portfolio — by Attribute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      164
 60     Non-Performing Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          166
 61     REO Activity by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           167
 62     Credit Loss Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          169
 63     Single-Family Charge-offs and Recoveries by Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         170
 64     Loan Loss Reserves Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            170
 65     Single-Family Impaired Loans with Specific Reserve Recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              171
 66     Single-Family Credit Loss Sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              171
 67     Other Debt Security Issuances by Product, at Par Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         178
 68     Other Debt Security Repurchases, Calls, and Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          179
 69     Freddie Mac Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           180
 70     Summary of Assets and Liabilities at Fair Value on a Recurring Basis. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                183
 71     Summary of Change in the Fair Value of Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         186
 72     Contractual Obligations by Year at December 31, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          189
 73     PMVS Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     198
 74     Derivative Impact on PMVS-L (50 bps) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   199
 75     2012 Program Target Compensation Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        320
 76     Board of Directors Committee Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      326
 77     2011 Semi-Monthly Base Salary, Deferred Base Salary, Target Opportunity, and Target TDC . . . . . . . . . . . .                                              335
 78     Achievement of Performance Measures for the Performance-Based Portion of Deferred Base Salary . . . . . .                                                    336
 79     2011 Deferred Base Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           338
 80     Achievement of Performance Measures for First Installment of 2011 Target Opportunity . . . . . . . . . . . . . . .                                           338
 81     Achievement of Performance Measures for Second Installment of 2010 Target Opportunity . . . . . . . . . . . . .                                              339
 82     2011 Target Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          340
 83     2011 Target TDC Compared to the Approved 2011 Actual TDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   341
 84     Named Executive Officer Individual Performance Summaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               342
 85     Summary Compensation Table — 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      347
 86     Grants of Plan-Based Awards — 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   348
 87     Outstanding Equity Awards at Fiscal Year-End — 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            349
 88     Option Exercises and Stock Vested — 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     349
 89     Pension Benefits — 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          350
 90     Non-Qualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  353
 91     Potential Payments Upon Termination of Employment or Change-in-Control as of December 31, 2011 . . . .                                                       355
 92     Board Compensation — 2011 Non-Employee Director Compensation Levels . . . . . . . . . . . . . . . . . . . . . . . .                                          357
 93     2011 Director Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             357
 94     Stock Ownership by Directors, Executive Officers, and Greater-Than-5% Holders . . . . . . . . . . . . . . . . . . . .                                        358
 95     Equity Compensation Plan Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  359
 96     Auditor Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   365




                                                                                   iii                                                                    Freddie Mac
                                       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                                                                                                                     Page

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        200
Freddie Mac Consolidated Statements of Income and Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                     202
Freddie Mac Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                203
Freddie Mac Consolidated Statements of Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      204
Freddie Mac Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      205
Note 1: Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     206
Note 2: Conservatorship and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                221
Note 3: Variable Interest Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       227
Note 4: Mortgage Loans and Loan Loss Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    232
Note 5: Individually Impaired and Non-Performing Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       237
Note 6: Real Estate Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        244
Note 7: Investments in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        245
Note 8: Debt Securities and Subordinated Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    255
Note 9: Financial Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       259
Note 10: Retained Interests in Mortgage-Related Securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        261
Note 11: Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   262
Note 12: Freddie Mac Stockholders’ Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    266
Note 13: Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      270
Note 14: Segment Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        273
Note 15: Regulatory Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      281
Note 16: Concentration of Credit and Other Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  282
Note 17: Fair Value Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        290
Note 18: Legal Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       306
Note 19: Selected Financial Statement Line Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 311
Quarterly Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        315




                                                                                    iv                                                                   Freddie Mac
                                                          PART I
     This Annual Report on Form 10-K includes forward-looking statements that are based on current expectations and
are subject to significant risks and uncertainties. These forward-looking statements are made as of the date of this
Form 10-K and we undertake no obligation to update any forward-looking statement to reflect events or circumstances
after the date of this Form 10-K. Actual results might differ significantly from those described in or implied by such
statements due to various factors and uncertainties, including those described in “BUSINESS — Forward-Looking
Statements,” and “RISK FACTORS” in this Form 10-K.
    Throughout this Form 10-K, we use certain acronyms and terms that are defined in the “GLOSSARY.”

                                                   ITEM 1. BUSINESS

Conservatorship
     We continue to operate under the direction of FHFA, as our Conservator. We are also subject to certain constraints on
our business activities imposed by Treasury due to the terms of, and Treasury’s rights under, the Purchase Agreement. We
are dependent upon the continued support of Treasury and FHFA in order to continue operating our business. Our ability
to access funds from Treasury under the Purchase Agreement is critical to keeping us solvent and avoiding the
appointment of a receiver by FHFA under statutory mandatory receivership provisions. The conservatorship and related
matters have had a wide-ranging impact on us, including our regulatory supervision, management, business, financial
condition, and results of operations.
     As our Conservator, FHFA succeeded to all rights, titles, powers and privileges of Freddie Mac, and of any
stockholder, officer or director thereof, with respect to the company and its assets. FHFA, as Conservator, has directed and
will continue to direct certain of our business activities and strategies. FHFA has delegated certain authority to our Board
of Directors to oversee, and to management to conduct, day-to-day operations. The directors serve on behalf of, and
exercise authority as directed by, the Conservator.
     There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified
termination date, and as to what changes may occur to our business structure during or following conservatorship,
including whether we will continue to exist. We are not aware of any current plans of our Conservator to significantly
change our business model or capital structure in the near-term. Our future structure and role will be determined by the
Administration and Congress, and there are likely to be significant changes beyond the near-term. We have no ability to
predict the outcome of these deliberations.
     A number of bills have been introduced in Congress that would bring about changes in the business model of Freddie
Mac and Fannie Mae. In addition, on February 11, 2011, the Administration delivered a report to Congress that lays out
the Administration’s plan to reform the U.S. housing finance market, including options for structuring the government’s
long-term role in a housing finance system in which the private sector is the dominant provider of mortgage credit. The
report recommends winding down Freddie Mac and Fannie Mae, and states that the Administration will work with FHFA
to determine the best way to responsibly reduce the role of Freddie Mac and Fannie Mae in the market and ultimately
wind down both institutions. The report states that these efforts must be undertaken at a deliberate pace, which takes into
account the impact that these changes will have on borrowers and the housing market.
     The report states that the government is committed to ensuring that Freddie Mac and Fannie Mae have sufficient
capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations,
and further states that the Administration will not pursue policies or reforms in a way that would impair the ability of
Freddie Mac and Fannie Mae to honor their obligations. The report states the Administration’s belief that under the
companies’ senior preferred stock purchase agreements with Treasury, there is sufficient funding to ensure the orderly and
deliberate wind down of Freddie Mac and Fannie Mae, as described in the Administration’s plan.
     On February 2, 2012, the Administration announced that it expects to provide more detail concerning approaches to
reform the U.S. housing finance market in the spring, and that it plans to begin exploring options for legislation more
intensively with Congress. On February 21, 2012, FHFA sent to Congress a strategic plan for the next phase of the
conservatorships of Freddie Mac and Fannie Mae. For more information on current legislative and regulatory initiatives,
see “Regulation and Supervision — Legislative and Regulatory Developments.”
     Our business objectives and strategies have in some cases been altered since we were placed into conservatorship,
and may continue to change. Based on our charter, other legislation, public statements from Treasury and FHFA officials,
and guidance and directives from our Conservator, we have a variety of different, and potentially competing, objectives.
Certain changes to our business objectives and strategies are designed to provide support for the mortgage market in a
                                                             1                                                 Freddie Mac
manner that serves our public mission and other non-financial objectives. However, these changes to our business
objectives and strategies may not contribute to our profitability. Some of these changes increase our expenses, while
others require us to forego revenue opportunities in the near-term. In addition, the objectives set forth for us under our
charter and by our Conservator, as well as the restrictions on our business under the Purchase Agreement, have adversely
impacted and may continue to adversely impact our financial results, including our segment results. For example, our
current business objectives reflect, in part, direction given to us by the Conservator. These efforts are expected to help
homeowners and the mortgage market and may help to mitigate future credit losses. However, some of our activities are
expected to have an adverse impact on our near- and long-term financial results. The Conservator and Treasury also did
not authorize us to engage in certain business activities and transactions, including the purchase or sale of certain assets,
which we believe might have had a beneficial impact on our results of operations or financial condition, if executed. Our
inability to execute such transactions may adversely affect our profitability, and thus contribute to our need to draw
additional funds under the Purchase Agreement.
     We had a net worth deficit of $146 million as of December 31, 2011, and, as a result, FHFA, as Conservator, will
submit a draw request, on our behalf, to Treasury under the Purchase Agreement in the amount of $146 million. Upon
funding of the draw request: (a) our aggregate liquidation preference on the senior preferred stock owned by Treasury will
increase to $72.3 billion; and (b) the corresponding annual cash dividend owed to Treasury will increase to $7.23 billion.
Under the Purchase Agreement, our ability to repay the liquidation preference of the senior preferred stock is limited and
we will not be able to do so for the foreseeable future, if at all. The aggregate liquidation preference of the senior
preferred stock and our related dividend obligations will increase further if we receive additional draws under the
Purchase Agreement or if any dividends or quarterly commitment fees payable under the Purchase Agreement are not paid
in cash. The amounts we are obligated to pay in dividends on the senior preferred stock are substantial and will have an
adverse impact on our financial position and net worth. We expect to make additional draws under the Purchase
Agreement in future periods.
     Our annual dividend obligation on the senior preferred stock exceeds our annual historical earnings in all but one
period. Although we may experience period-to-period variability in earnings and comprehensive income, it is unlikely that
we will regularly generate net income or comprehensive income in excess of our annual dividends payable to Treasury. As
a result, there is significant uncertainty as to our long-term financial sustainability. Continued cash payment of senior
preferred dividends, combined with potentially substantial quarterly commitment fees payable to Treasury under the
Purchase Agreement, will have an adverse impact on our future financial condition and net worth. The payment of
dividends on our senior preferred stock in cash reduces our net worth. For periods in which our earnings and other
changes in equity do not result in positive net worth, draws under the Purchase Agreement effectively fund the cash
payment of senior preferred dividends to Treasury.
    For more information on our current business objectives, see “Executive Summary — Our Primary Business
Objectives.” For more information on the conservatorship and government support for our business, see “Executive
Summary — Government Support for Our Business” and “Conservatorship and Related Matters.”

Executive Summary
     You should read this Executive Summary in conjunction with our MD&A and consolidated financial statements and
related notes for the year ended December 31, 2011.

Overview
     Freddie Mac is a GSE chartered by Congress in 1970 with a public mission to provide liquidity, stability, and
affordability to the U.S. housing market. We have maintained a consistent market presence since our inception, providing
mortgage liquidity in a wide range of economic environments. During the worst housing and financial crisis since the
Great Depression, we are working to support the recovery of the housing market and the nation’s economy by providing
essential liquidity to the mortgage market and helping to stem the rate of foreclosures. We believe our actions are helping
communities across the country by providing America’s families with access to mortgage funding at low rates while
helping distressed borrowers keep their homes and avoid foreclosure, where feasible.

Summary of Financial Results
    Our financial performance in 2011 was impacted by the ongoing weakness in the economy, including in the
mortgage market, and by a significant reduction in long-term interest rates and changes in OAS levels. Our total
comprehensive income (loss) was $(1.2) billion and $282 million for 2011 and 2010, respectively, consisting of:
                                                              2                                                  Freddie Mac
(a) $5.3 billion and $14.0 billion of net loss, respectively; and (b) $4.0 billion and $14.3 billion of total other
comprehensive income, respectively.
     Our total equity (deficit) was $(146) million at December 31, 2011, reflecting our total comprehensive income of
$1.5 billion for the fourth quarter of 2011 and our dividend payment of $1.7 billion on our senior preferred stock on
December 30, 2011. To address our deficit in net worth, FHFA, as Conservator, will submit a draw request on our behalf
to Treasury under the Purchase Agreement for $146 million. Following receipt of the draw, the aggregate liquidation
preference on the senior preferred stock owned by Treasury will increase to $72.3 billion.
     During 2011, we paid cash dividends to Treasury of $6.5 billion on our senior preferred stock. We received cash
proceeds of $8.0 billion from draws under Treasury’s funding commitment during 2011 related to quarterly deficits in
equity at December 31, 2010, June 30, 2011, and September 30, 2011.

Our Primary Business Objectives
      Under conservatorship, we are focused on the following primary business objectives: (a) meeting the needs of the
U.S. residential mortgage market by making home ownership and rental housing more affordable by providing liquidity to
mortgage originators and, indirectly, to mortgage borrowers; (b) working to reduce the number of foreclosures and helping
to keep families in their homes, including through our role in FHFA and other governmental initiatives, such as the
FHFA-directed servicing alignment initiative, HAMP and HARP, as well as our own workout and refinancing initiatives;
(c) minimizing our credit losses; (d) maintaining sound credit quality of the loans we purchase and guarantee; and
(e) strengthening our infrastructure and improving overall efficiency while also focusing on retention of key employees.
     Our business objectives reflect, in part, direction we have received from the Conservator. We also have a variety of
different, and potentially competing, objectives based on our charter, other legislation, public statements from Treasury
and FHFA officials, and other guidance and directives from our Conservator. For more information, see “Conservatorship
and Related Matters — Impact of Conservatorship and Related Actions on Our Business.” We are in discussions with
FHFA regarding their strategic plan for Freddie Mac and Fannie Mae. See “Regulation and Supervision — Legislative and
Regulatory Developments — FHFA’s Strategic Plan for Freddie Mac and Fannie Mae Conservatorships” for further
information.
     We believe our risks related to employee turnover are increasing. Uncertainty surrounding our future business model,
organizational structure, and compensation structure has contributed to increased levels of voluntary employee turnover.
Disruptive levels of turnover at both the executive and employee levels could lead to breakdowns in many of our
operations. As a result of the increasing risk of employee turnover, we are exploring options to enter into various strategic
arrangements with outside firms to provide operational capability and staffing for key functions, if needed. However, these
or other efforts to manage this risk to the enterprise may not be successful.

Providing Mortgage Liquidity and Conforming Loan Availability
     We provide liquidity and support to the U.S. mortgage market in a number of important ways:
     • Our support enables borrowers to have access to a variety of conforming mortgage products, including the
       prepayable 30-year fixed-rate mortgage, which historically has represented the foundation of the mortgage market.
     • Our support provides lenders with a constant source of liquidity for conforming mortgage products. We estimate
       that we, Fannie Mae, and Ginnie Mae collectively guaranteed more than 90% of the single-family conforming
       mortgages originated during 2011.
     • Our consistent market presence provides assurance to our customers that there will be a buyer for their conforming
       loans that meet our credit standards. We believe this liquidity provides our customers with confidence to continue
       lending in difficult environments.
     • We are an important counter-cyclical influence as we stay in the market even when other sources of capital have
       withdrawn.
    During 2011 and 2010, we guaranteed $304.6 billion and $384.6 billion in UPB of single-family conforming
mortgage loans, respectively, representing more than 1.4 million and 1.8 million borrowers, respectively, who purchased
homes or refinanced their mortgages.
     Borrowers typically pay a lower interest rate on loans acquired or guaranteed by Freddie Mac, Fannie Mae, or Ginnie
Mae. Mortgage originators are generally able to offer homebuyers and homeowners lower mortgage rates on conforming
loan products, including ours, in part because of the value investors place on GSE-guaranteed mortgage-related securities.
Prior to 2007, mortgage markets were less volatile, home values were stable or rising, and there were many sources of
                                                               3                                                      Freddie Mac
mortgage funds. We estimate that, for 20 years prior to 2007, the average effective interest rates on conforming, fixed-rate
single-family mortgage loans were about 30 basis points lower than on non-conforming loans. Since 2007, we estimate
that, at times, interest rates on conforming, fixed-rate loans, excluding conforming jumbo loans, have been lower than
those on non-conforming loans by as much as 184 basis points. In December 2011, we estimate that borrowers were
paying an average of 56 basis points less on these conforming loans than on non-conforming loans. These estimates are
based on data provided by HSH Associates, a third-party provider of mortgage market data. Future increases in our
management and guarantee fee rates, such as those required under the recently enacted Temporary Payroll Tax Cut
Continuation Act of 2011, may reduce the difference in rates between conforming and non-conforming loans over time.
For more information, see “Regulation and Supervision — Legislative and Regulatory Developments — Legislated
Increase to Guarantee Fees.”

Reducing Foreclosures and Keeping Families in Homes
      We are focused on reducing the number of foreclosures and helping to keep families in their homes. In addition to
our participation in HAMP, we introduced several new initiatives during the last few years to help eligible borrowers keep
their homes or avoid foreclosure, including our relief refinance mortgage initiative. During 2011 and 2010, we helped
more than 208,000 and 275,000 borrowers, respectively, either stay in their homes or sell their properties and avoid
foreclosure through HAMP and our various other workout initiatives.
     On April 28, 2011, FHFA announced a new set of aligned standards for servicing non-performing loans owned or
guaranteed by Freddie Mac and Fannie Mae. The servicing alignment initiative provides for consistent ongoing processes
for non-HAMP loan modifications. We implemented most aspects of this initiative in 2011. We believe that the servicing
alignment initiative will ultimately change, among other things, the way servicers communicate and work with troubled
borrowers, bring greater consistency and accountability to the servicing industry, and help more distressed homeowners
avoid foreclosure. For information on changes to mortgage servicing and foreclosure practices that could adversely affect
our business, see “Regulation and Supervision — Legislative and Regulatory Developments — Developments Concerning
Single-Family Servicing Practices.”
     In addition to these loan workout initiatives, our relief refinance opportunities, including HARP (which is the portion
of our relief refinance initiative for loans with LTV ratios above 80%), are a significant part of our effort to keep families
in their homes. Relief refinance loans have been provided to more than 480,000 borrowers with LTV ratios above 80%
since the initiative began in 2009, including nearly 185,000 such loans during 2011.
      The table below presents our single-family loan workout activities for the last five quarters.

Table 1 — Total Single-Family Loan Workout Volumes(1)
                                                                                                                                                                For the Three Months Ended
                                                                                                                                              12/31/2011   09/30/2011    06/30/2011     03/31/2011   12/31/2010
                                                                                                                                                                      (number of loans)
Loan modifications . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    19,048       23,919        31,049         35,158       37,203
Repayment plans . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     8,008        8,333         7,981          9,099        7,964
Forbearance agreements(2) . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     3,867        4,262         3,709          7,678        5,945
Short sales and deed in lieu of foreclosure transactions              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    12,675       11,744        11,038         10,706       12,097
Total single-family loan workouts . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    43,598       48,258        53,777         62,641       63,209

(1) Based on actions completed with borrowers for loans within our single-family credit guarantee portfolio. Excludes those modification, repayment,
    and forbearance activities for which the borrower has started the required process, but the actions have not been made permanent or effective, such
    as loans in modification trial periods. Also excludes certain loan workouts where our single-family seller/servicers have executed agreements in the
    current or prior periods, but these have not been incorporated into certain of our operational systems, due to delays in processing. These categories
    are not mutually exclusive and a loan in one category may also be included within another category in the same period.
(2) Excludes loans with long-term forbearance under a completed loan modification. Many borrowers complete a short-term forbearance agreement
    before another loan workout is pursued or completed. We only report forbearance activity for a single loan once during each quarterly period;
    however, a single loan may be included under separate forbearance agreements in separate periods.

    We continue to directly assist troubled borrowers through targeted outreach, loan workouts, and other efforts.
Highlights of these efforts include the following:
      • We completed 208,274 single-family loan workouts during 2011, including 109,174 loan modifications (HAMP and
        non-HAMP) and 46,163 short sales and deed in lieu of foreclosure transactions.
      • Based on information provided by the MHA Program administrator, our servicers had completed 152,519 loan
        modifications under HAMP from the introduction of the initiative in 2009 through December 31, 2011 and, as of
        December 31, 2011, 12,802 loans were in HAMP trial periods (this figure only includes borrowers who made at
        least their first payment under the trial period).
                                                                                                                  4                                                                            Freddie Mac
      On October 24, 2011, FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to HARP
in an effort to allow more borrowers to participate in the program and benefit from refinancing their home mortgages. The
Acting Director of FHFA stated that the goal of pursuing these changes is to create refinancing opportunities for more
borrowers whose mortgages are owned or guaranteed by Freddie Mac and Fannie Mae while reducing risk for these
entities and bringing a measure of stability to housing markets. The revisions to HARP enable us to expand the assistance
we provide to homeowners by making their mortgage payments more affordable through one or more of the following
ways: (a) a reduction in payment; (b) a reduction in rate; (c) movement to a more stable mortgage product type (i.e., from
an adjustable-rate mortgage to a fixed-rate mortgage); or (d) a reduction in amortization term.
     In November 2011, Freddie Mac and Fannie Mae issued guidance with operational details about the HARP changes
to mortgage lenders and servicers after receiving information from FHFA about the fees that we may charge associated
with the refinancing program. Since industry participation in HARP is not mandatory, we anticipate that implementation
schedules will vary as individual lenders, mortgage insurers, and other market participants modify their processes. It is too
early to estimate how many eligible borrowers are likely to refinance under the revised program.
     For more information about HAMP, our new non-HAMP standard loan modification, other loan workout programs,
HARP and our relief refinance mortgage initiative, and other initiatives to help eligible borrowers keep their homes or
avoid foreclosure, see “MD&A — RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-Family
Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program.”

Minimizing Credit Losses
     To help minimize the credit losses related to our guarantee activities, we are focused on:
     • pursuing a variety of loan workouts, including foreclosure alternatives, in an effort to reduce the severity of losses
       we experience over time;
     • managing foreclosure timelines to the extent possible, given the increasingly lengthy foreclosure process in many
       states;
     • managing our inventory of foreclosed properties to reduce costs and maximize proceeds; and
     • pursuing contractual remedies against originators, lenders, servicers, and insurers, as appropriate.
     We establish guidelines for our servicers to follow and provide them default management tools to use, in part, in
determining which type of loan workout would be expected to provide the best opportunity for minimizing our credit
losses. We require our single-family seller/servicers to first evaluate problem loans for a repayment or forbearance plan
before considering modification. If a borrower is not eligible for a modification, our seller/servicers pursue other workout
options before considering foreclosure.
      Our servicers pursue repayment plans and loan modifications for borrowers facing financial or other hardships since
the level of recovery (if a loan reperforms) may often be much higher than with foreclosure or foreclosure alternatives. In
cases where these alternatives are not possible or successful, a short sale transaction typically provides us with a
comparable or higher level of recovery than what we would receive through property sales from our REO inventory. In
large part, the benefit of short sales arises from the avoidance of costs we would otherwise incur to complete the
foreclosure and dispose of the property, including maintenance and other property expenses associated with holding REO
property, legal fees, commissions, and other selling expenses of traditional real estate transactions. The foreclosure process
is a lengthy one in many jurisdictions with significant associated costs to complete, including, in times of home value
decline, foregone recovery we might receive from an earlier sale.
      We have contractual arrangements with our seller/servicers under which they agree to sell us mortgage loans, and
represent and warrant that those loans have been originated under specified underwriting standards. If we subsequently
discover that the representations and warranties were breached (i.e., contractual standards were not followed), we can
exercise certain contractual remedies to mitigate our actual or potential credit losses. These contractual remedies include
requiring the seller/servicer to repurchase the loan at its current UPB or make us whole for any credit losses realized with
respect to the loan. The amount we expect to collect on outstanding repurchase requests is significantly less than the UPB
of the loans subject to the repurchase requests primarily because many of these requests will likely be satisfied by the
seller/servicers reimbursing us for realized credit losses. Some of these requests also may be rescinded in the course of the
contractual appeals process. As of December 31, 2011, the UPB of loans subject to repurchase requests issued to our
single-family seller/servicers was approximately $2.7 billion, and approximately 39% of these requests were outstanding
for more than four months since issuance of our initial repurchase request (this figure includes repurchase requests for
                                                              5                                                  Freddie Mac
which appeals were pending). Of the total amount of repurchase requests outstanding at December 31, 2011,
approximately $1.2 billion were issued due to mortgage insurance rescission or mortgage insurance claim denial.
      Our credit loss exposure is also partially mitigated by mortgage insurance, which is a form of credit enhancement.
Primary mortgage insurance is required to be purchased, typically at the borrower’s expense, for certain mortgages with
higher LTV ratios. As of December 31, 2011, we had mortgage insurance coverage on loans that represent approximately
13% of the UPB of our single-family credit guarantee portfolio. We received payments under primary and other mortgage
insurance of $2.5 billion and $1.8 billion in 2011 and 2010, respectively, which helped to mitigate our credit losses. See
“NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES — Table 4.5 — Recourse and Other Forms of Credit
Protection” for more detail. The financial condition of many of our mortgage insurers continued to deteriorate in 2011.
We expect to receive substantially less than full payment of our claims from Triad Guaranty Insurance Corp., Republic
Mortgage Insurance Company, and PMI Mortgage Insurance Co., which are three of our mortgage insurance
counterparties. We believe that certain other of our mortgage insurance counterparties may lack sufficient ability to meet
all their expected lifetime claims paying obligations to us as those claims emerge. Our loan loss reserves reflect our
estimates of expected insurance recoveries related to probable incurred losses. As of December 31, 2011, only six
insurance companies remained as eligible insurers for Freddie Mac loans, which means that, in the future, our mortgage
insurance exposure will be concentrated among a smaller number of counterparties.
     See “MD&A — RISK MANAGEMENT — Credit Risk — Institutional Credit Risk” for further information on our
agreements with our seller/servicers and our exposure to mortgage insurers.

Maintaining Sound Credit Quality of New Loan Purchases and Guarantees
     We continue to focus on maintaining credit policies, including our underwriting standards, that allow us to purchase
and guarantee loans made to qualified borrowers that we believe will provide management and guarantee fee income, over
the long-term, that exceeds our expected credit-related and administrative expenses on such loans.
     The credit quality of the single-family loans we acquired in 2011 (excluding relief refinance mortgages, which
represented approximately 26% of our single-family purchase volume during 2011) is significantly better than that of
loans we acquired from 2005 through 2008, as measured by early delinquency rate trends, original LTV ratios, FICO
scores, and the proportion of loans underwritten with fully documented income. As of December 31, 2011 and
December 31, 2010, approximately 51% and 39%, respectively, of our single-family credit guarantee portfolio consisted of
mortgage loans originated after 2008 (including relief refinance mortgages), which have experienced lower serious
delinquency trends in the early years of their terms than loans originated in 2005 through 2008.
     The improvement in credit quality of loans we have purchased during the last three years (excluding relief refinance
mortgages) is primarily the result of the combination of: (a) changes in our credit policies, including changes in our
underwriting standards; (b) fewer purchases of loans with higher risk characteristics; and (c) changes in mortgage
insurers’ and lenders’ underwriting practices.
      Our underwriting procedures for relief refinance mortgages are limited in many cases, and such procedures generally
do not include all of the changes in underwriting standards we have implemented in the last several years. As a result,
relief refinance mortgages generally reflect many of the credit risk attributes of the original loans. However, borrower
participation in our relief refinance mortgage initiative may help reduce our exposure to credit risk in cases where
borrower payments under their mortgages are reduced, thereby strengthening the borrower’s potential to make their
mortgage payments.
    Approximately 92% of our single-family purchase volume in 2011 consisted of fixed-rate amortizing mortgages.
Approximately 78% and 80% of our single-family purchase volumes in 2011 and 2010, respectively, were refinance
mortgages, including approximately 33% and 35%, respectively, of these loans that were relief refinance mortgages, based
on UPB.
     There is an increase in borrower default risk as LTV ratios increase, particularly for loans with LTV ratios above
80%. Over time, relief refinance mortgages with LTV ratios above 80% (HARP loans) may not perform as well as relief
refinance mortgages with LTV ratios of 80% and below because of the continued high LTV ratios of these loans. In
addition, relief refinance mortgages may not be covered by mortgage insurance for the full excess of their UPB over 80%.
Approximately 12% of our single-family purchase volume in both 2011 and 2010 was relief refinance mortgages with
LTV ratios above 80%. Relief refinance mortgages of all LTV ratios comprised approximately 11% and 7% of the UPB in
our total single-family credit guarantee portfolio at December 31, 2011 and 2010, respectively.
     The table below presents the composition, loan characteristics, and serious delinquency rates of loans in our single-
family credit guarantee portfolio, by year of origination at December 31, 2011.
                                                             6                                                 Freddie Mac
Table 2 — Single-Family Credit Guarantee Portfolio Data by Year of Origination(1)
                                                                                                                                                                                       At December 31, 2011
                                                                                                                                                                      Average                                   Current        Serious
                                                                                                                                                           % of        Credit      Original       Current      LTV Ratio     Delinquency
                                                                                                                                                          Portfolio   Score(2)   LTV Ratio(3)   LTV Ratio(4)    100%(4)(5)     Rate(6)

Year of Origination
2011 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      14%       755           70%             70%           5%           0.06%
2010 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      19        754           70              71            6            0.25
2009 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      18        753           69              72            6            0.52
2008 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       7        725           74              92           36            5.65
2007 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      10        705           77             113           61           11.58
2006 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       7        710           75             112           56           10.82
2005 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       8        716           73              96           39            6.51
2004 and prior . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      17        719           71              61            9            2.83
Total . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     100%       735           72              80           20            3.58

(1) Based on the loans remaining in the portfolio at December 31, 2011, which totaled $1,746 billion, rather than all loans originally guaranteed by us
    and originated in the respective year.
(2) Based on FICO score of the borrower as of the date of loan origination and may not be indicative of the borrowers’ creditworthiness at
    December 31, 2011. Excludes approximately $10 billion in UPB of loans where the FICO scores at origination were not available at December 31,
    2011.
(3) See endnote (4) to “Table 45 — Characteristics of the Single-Family Credit Guarantee Portfolio” for information on our calculation of original LTV
    ratios.
(4) We estimate current market values by adjusting the value of the property at origination based on changes in the market value of homes in the same
    geographical area since origination. See endnote (5) of “Table 45 — Characteristics of the Single-Family Credit Guarantee Portfolio” for additional
    information on our calculation of current LTV ratios.
(5) Calculated as a percentage of the aggregate UPB of loans with LTV ratios greater than 100% in relation to the total UPB of loans in the category.
(6) See “MD&A — RISK MANAGEMENT— Credit Risk— Mortgage Credit Risk — Single-family Mortgage Credit Risk — Delinquencies” for further
    information about our reported serious delinquency rates.

     Mortgages originated after 2008, including relief refinance mortgages, represent a growing proportion of our single-
family credit guarantee portfolio. The UPB of loans originated in 2005 to 2008 within our single-family credit guarantee
portfolio continues to decline due to liquidations, which include prepayments, refinancing activity, foreclosure alternatives,
and foreclosure transfers. We currently expect that, over time, the replacement (other than through relief refinance
activity) of the 2005 to 2008 vintages, which have a higher composition of loans with higher-risk characteristics, should
positively impact the serious delinquency rates and credit-related expenses of our single-family credit guarantee portfolio.
However, the rate at which this replacement is occurring slowed beginning in 2010, due primarily to a decline in the
volume of home purchase mortgage originations and delays in the foreclosure process. See “Table 19 — Segment
Earnings Composition — Single-Family Guarantee Segment” for an analysis of the contribution to Segment Earnings
(loss) by loan origination year.

Strengthening Our Infrastructure and Improving Overall Efficiency
     We are working to both enhance the quality of our infrastructure and improve our efficiency in order to preserve the
taxpayers’ investment. We are focusing our resources primarily on key projects, many of which will likely take several
years to fully implement, and on making significant improvements to our systems infrastructure in order to: (a) implement
mandatory initiatives from FHFA or other governmental bodies; (b) replace legacy hardware or software systems at the
end of their lives and to strengthen our disaster recovery capabilities; and (c) improve our data collection and
administration as well as our ability to assist in the servicing of loans.
     We continue to actively manage our general and administrative expenses, while also continuing to focus on retaining
key talent. Our general and administrative expenses declined in 2011 compared to 2010, largely due to a reduction in the
number of our employees. We do not expect that our general and administrative expenses for 2012 will continue to
decline, in part due to the continually changing mortgage market, an environment in which we are subject to increased
regulatory oversight and mandates and strategic arrangements that we may enter into with outside firms to provide
operational capability and staffing for key functions, if needed.

Single-Family Credit Guarantee Portfolio
     The UPB of our single-family credit guarantee portfolio declined approximately 3.5% and 5.0% during 2011 and
2010, respectively, as the amount of single-family loan liquidations has exceeded new loan purchase and guarantee
activity in the last two years. We believe this is due, in part, to declines in the amount of single-family mortgage debt
outstanding in the market and increased competition from Ginnie Mae and FHA/VA. Although the number of seriously
delinquent loans declined in both 2010 and 2011, our delinquency rates were higher than they otherwise would have been,
because the size of our portfolio has declined and therefore these rates are calculated on a smaller base of loans at the end
of each period. The table below provides certain credit statistics for our single-family credit guarantee portfolio.
                                                                                                                                                             7                                                           Freddie Mac
Table 3 — Credit Statistics, Single-Family Credit Guarantee Portfolio
                                                                                                                                                                                                      As of
                                                                                                                                                                       12/31/2011    9/30/2011      6/30/2011      3/31/2011    12/31/2010

Payment status —
  One month past due . . . . . . . . . . . . . . . .                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     2.02%     1.94%    1.92%    1.75%     2.07%
  Two months past due . . . . . . . . . . . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     0.70%     0.70%    0.67%    0.65%     0.78%
  Seriously delinquent(1) . . . . . . . . . . . . . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     3.58%     3.51%    3.50%    3.63%     3.84%
Non-performing loans (in millions)(2) . . . . . .                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $120,514  $119,081 $114,819 $115,083  $115,478
Single-family loan loss reserve (in millions)(3)                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 38,916  $ 39,088 $ 38,390 $ 38,558  $ 39,098
REO inventory (in properties) . . . . . . . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   60,535    59,596   60,599   65,159    72,079
REO assets, net carrying value (in millions) . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 5,548   $ 5,539 $ 5,834 $ 6,261     $ 6,961
                                                                                                                                                                                          For the Three Months Ended
                                                                                                                                                                       12/31/2011    9/30/2011      6/30/2011       3/31/2011   12/31/2010
                                                                                                                                                                                             (in units, unless noted)
Seriously delinquent loan additions(1) . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       95,661      93,850         87,813         97,646      113,235
Loan modifications(4) . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       19,048      23,919         31,049         35,158       37,203
Foreclosure starts ratio(5) . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         0.54%       0.56%          0.55%          0.58%        0.73%
REO acquisitions . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       24,758      24,378         24,788         24,707       23,771
REO disposition severity ratio:(6)
  California . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        44.6%        45.5%          44.9%           44.5%        43.9%
  Arizona . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        46.7%        48.7%          51.3%           50.8%        49.5%
  Florida . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        50.1%        53.3%          52.7%           54.8%        53.0%
  Nevada . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        54.2%        53.2%          55.4%           53.1%        53.1%
  Illinois . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        51.2%        50.5%          49.4%           49.5%        49.4%
  Total U.S. . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        41.2%        41.9%          41.7%           43.0%        41.3%
Single-family credit losses (in millions) .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $   3,209  $     3,440 $        3,106 $         3,226  $     3,086
(1) See “MD&A — RISK MANAGEMENT— Credit Risk — Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Delinquencies” for
    further information about our reported serious delinquency rates.
(2) Consists of the UPB of loans in our single-family credit guarantee portfolio that have undergone a TDR or that are seriously delinquent. As of
    December 31, 2011 and December 31, 2010, approximately $44.4 billion and $26.6 billion in UPB of TDR loans, respectively, were no longer
    seriously delinquent.
(3) Consists of the combination of: (a) our allowance for loan losses on mortgage loans held for investment; and (b) our reserve for guarantee losses
    associated with non-consolidated single-family mortgage securitization trusts and other guarantee commitments.
(4) Represents the number of completed modifications under agreement with the borrower during the quarter. Excludes forbearance agreements,
    repayment plans, and loans in modification trial periods.
(5) Represents the ratio of the number of loans that entered the foreclosure process during the respective quarter divided by the number of loans in the
    single-family credit guarantee portfolio at the end of the quarter. Excludes Other Guarantee Transactions and mortgages covered under other
    guarantee commitments.
(6) States presented represent the five states where our credit losses have been greatest during 2011. Calculated as the amount of our losses recorded on
    disposition of REO properties during the respective quarterly period, excluding those subject to repurchase requests made to our seller/servicers,
    divided by the aggregate UPB of the related loans. The amount of losses recognized on disposition of the properties is equal to the amount by which
    the UPB of the loans exceeds the amount of sales proceeds from disposition of the properties. Excludes sales commissions and other expenses, such
    as property maintenance and costs, as well as applicable recoveries from credit enhancements, such as mortgage insurance.

     In discussing our credit performance, we often use the terms “credit losses” and “credit-related expenses.” These
terms are significantly different. Our “credit losses” consist of charge-offs and REO operations income (expense), while
our “credit-related expenses” consist of our provision for credit losses and REO operations income (expense).
     Since the beginning of 2008, on an aggregate basis, we have recorded provision for credit losses associated with
single-family loans of approximately $73.2 billion, and have recorded an additional $4.3 billion in losses on loans
purchased from PC trusts, net of recoveries. The majority of these losses are associated with loans originated in 2005
through 2008. While loans originated in 2005 through 2008 will give rise to additional credit losses that have not yet been
incurred and, thus, have not yet been provisioned for, we believe that, as of December 31, 2011, we have reserved for or
charged-off the majority of the total expected credit losses for these loans. Nevertheless, various factors, such as continued
high unemployment rates or further declines in home prices, could require us to provide for losses on these loans beyond
our current expectations.
     The quarterly number of seriously delinquent loan additions declined during the first half of 2011; however, we
experienced a small increase in the quarterly number of seriously delinquent loan additions during the second half of
2011. As of December 31, 2011 and December 31, 2010, the percentage of seriously delinquent loans that have been
delinquent for more than six months was 70% and 66%, respectively. Several factors, including delays in the foreclosure
process, have resulted in loans remaining in serious delinquency for longer periods than prior to 2008, particularly in
states that require a judicial foreclosure process. The credit losses and loan loss reserves associated with our single-family
credit guarantee portfolio remained elevated in 2011, due in part to:
       • Losses associated with the continued high volume of foreclosures and foreclosure alternatives. These actions relate
         to the continued efforts of our servicers to resolve our large inventory of seriously delinquent loans. Due to the
         length of time necessary for servicers either to complete the foreclosure process or pursue foreclosure alternatives
                                                                                                                                           8                                                                               Freddie Mac
       on seriously delinquent loans in our portfolio, we expect our credit losses will continue to remain high even if the
       volume of new serious delinquencies declines.
    • Continued negative impact of certain loan groups within the single-family credit guarantee portfolio, such as those
      underwritten with certain lower documentation standards and interest-only loans, as well as other 2005 through
      2008 vintage loans. These groups continue to be large contributors to our credit losses.
    • Cumulative declines in national home prices during the last five years, based on our own index. As a result of
      these price declines, approximately 20% of loans in our single-family credit guarantee portfolio, based on UPB,
      had estimated current LTV ratios in excess of 100% (underwater loans) as of December 31, 2011.
    • Deterioration in the financial condition of many of our mortgage insurers, which reduced our estimates of expected
      recoveries from these counterparties.
      Some of our loss mitigation activities create fluctuations in our delinquency statistics. For example, loans that we
report as seriously delinquent before they enter a modification trial period continue to be reported as seriously delinquent
until the modifications become effective and the loans are removed from delinquent status by our servicers. See
“MD&A — RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-family Mortgage Credit Risk —
Credit Performance — Delinquencies” for further information about factors affecting our reported delinquency rates.

Government Support for our Business
      We are dependent upon the continued support of Treasury and FHFA in order to continue operating our business. Our
ability to access funds from Treasury under the Purchase Agreement is critical to keeping us solvent and avoiding the
appointment of a receiver by FHFA under statutory mandatory receivership provisions.
     Under the Purchase Agreement, Treasury made a commitment to provide funding, under certain conditions, to
eliminate deficits in our net worth. The $200 billion cap on Treasury’s funding commitment will increase as necessary to
eliminate any net worth deficits we may have during 2010, 2011, and 2012. We believe that the support provided by
Treasury pursuant to the Purchase Agreement currently enables us to maintain our access to the debt markets and to have
adequate liquidity to conduct our normal business activities, although the costs of our debt funding could vary.
     To address our net worth deficit of $146 million at December 31, 2011, FHFA, as Conservator, will submit a draw
request on our behalf to Treasury under the Purchase Agreement in the amount of $146 million. FHFA will request that
we receive these funds by March 31, 2012. Upon funding of the draw request: (a) our aggregate liquidation preference on
the senior preferred stock owned by Treasury will increase to $72.3 billion; and (b) the corresponding annual cash
dividend owed to Treasury will increase to $7.23 billion.
     We pay cash dividends to Treasury at an annual rate of 10%. During 2011, we paid dividends to Treasury of
$6.5 billion. We received cash proceeds of $8.0 billion from draws under Treasury’s funding commitment during 2011.
Through December 31, 2011, we paid aggregate cash dividends to Treasury of $16.5 billion, an amount equal to 23% of
our aggregate draws received under the Purchase Agreement. As of December 31, 2011, our annual cash dividend
obligation to Treasury on the senior preferred stock exceeded our annual historical earnings in all but one period.
     We expect to request additional draws under the Purchase Agreement in future periods. Over time, our dividend
obligation to Treasury will increasingly drive future draws. Although we may experience period-to-period variability in
earnings and comprehensive income, it is unlikely that we will generate net income or comprehensive income in excess of
our annual dividends payable to Treasury over the long term. In addition, we are required under the Purchase Agreement
to pay a quarterly commitment fee to Treasury, which could contribute to future draws if the fee is not waived. Treasury
waived the fee for all quarters of 2011 and the first quarter of 2012, but it has indicated that it remains committed to
protecting taxpayers and ensuring that our future positive earnings are returned to taxpayers as compensation for their
investment. The amount of the quarterly commitment fee has not yet been established and could be substantial.
     There continues to be significant uncertainty in the current mortgage market environment, and continued high levels
of unemployment, weakness in home prices, and adverse changes in interest rates, mortgage security prices, and spreads
could lead to additional draws. For discussion of other factors that could result in additional draws, see “RISK
FACTORS — Conservatorship and Related Matters — We expect to make additional draws under the Purchase Agreement
in future periods, which will adversely affect our future results of operations and financial condition.”
     On August 5, 2011, S&P lowered the long-term credit rating of the U.S. government to “AA+” from “AAA” and
assigned a negative outlook to the rating. On August 8, 2011, S&P lowered our senior long-term debt credit rating to
“AA+” from “AAA” and assigned a negative outlook to the rating. While this could adversely affect our liquidity and the
supply and cost of debt financing available to us in the future, we have not yet experienced such adverse effects. For more
                                                              9                                                 Freddie Mac
information, see “MD&A — LIQUIDITY AND CAPITAL RESOURCES — Liquidity — Other Debt Securities — Credit
Ratings.”
    Neither the U.S. government nor any other agency or instrumentality of the U.S. government is obligated to fund our
mortgage purchase or financing activities or to guarantee our securities or other obligations.
    For more information on the Purchase Agreement, see “Conservatorship and Related Matters.”

Consolidated Financial Results — 2011 versus 2010
     Net loss was $5.3 billion and $14.0 billion for the years ended December 31, 2011 and 2010, respectively. Key
highlights of our financial results include:
    • Net interest income for the year ended December 31, 2011 increased to $18.4 billion from $16.9 billion for the
      year ended December 31, 2010, mainly due to lower funding costs, partially offset by a decline in the average
      balances of mortgage-related assets.
    • Provision for credit losses for the year ended December 31, 2011 decreased to $10.7 billion, compared to
      $17.2 billion for the year ended December 31, 2010. The provision for credit losses in 2011 reflects a decline in
      the rate at which single-family loans transition into serious delinquency or are modified, but was partially offset by
      our lowered expectations for mortgage insurance recoveries, which is due to the continued deterioration in the
      financial condition of the mortgage insurance industry in 2011.
    • Non-interest income (loss) was $(10.9) billion for the year ended December 31, 2011, compared to $(11.6) billion
      for the year ended December 31, 2010, largely driven by substantial derivative losses in both periods. However,
      there was a significant decline in net impairments of available-for-sale securities recognized in earnings during the
      year ended December 31, 2011 compared to the year ended December 31, 2010.
    • Non-interest expense was $2.5 billion and $2.9 billion in the years ended December 31, 2011 and 2010,
      respectively, as we had higher expenses in 2010 than in 2011 associated with transfers and terminations of
      mortgage servicing, primarily related to Taylor, Bean & Whitaker Mortgage Corp., or TBW.
    • Total comprehensive income (loss) was $(1.2) billion for the year ended December 31, 2011 compared to
      $282 million for the year ended December 31, 2010. Total comprehensive income (loss) for the year ended
      December 31, 2011 was driven by the $5.3 billion net loss, partially offset by a reduction in gross unrealized losses
      related to our available-for-sale securities.

Our Business
     We conduct business in the U.S. residential mortgage market and the global securities market, subject to the direction
of our Conservator, FHFA, and under regulatory supervision of FHFA, the SEC, HUD, and Treasury. The size of the
U.S. residential mortgage market is affected by many factors, including changes in interest rates, home ownership rates,
home prices, the supply of housing and lender preferences regarding credit risk and borrower preferences regarding
mortgage debt. The amount of residential mortgage debt available for us to purchase and the mix of available loan
products are also affected by several factors, including the volume of mortgages meeting the requirements of our charter
(which is affected by changes in the conforming loan limit determined by FHFA), our own preference for credit risk
reflected in our purchase standards and the mortgage purchase and securitization activity of other financial institutions.
We conduct our operations solely in the U.S. and its territories, and do not generate any revenue from or have assets in
geographic locations outside of the U.S. and its territories.
     Our charter forms the framework for our business activities, the initiatives we bring to market and the services we
provide to the nation’s residential housing and mortgage industries. Our charter also determines the types of mortgage
loans that we are permitted to purchase. Our statutory mission as defined in our charter is to:
    • provide stability in the secondary market for residential mortgages;
    • respond appropriately to the private capital market;
    • provide ongoing assistance to the secondary market for residential mortgages (including activities relating to
      mortgages for low- and moderate-income families, involving a reasonable economic return that may be less than
      the return earned on other activities); and
    • promote access to mortgage credit throughout the U.S. (including central cities, rural areas, and other underserved
      areas).
                                                             10                                                Freddie Mac
      Our charter does not permit us to originate mortgage loans or lend money directly to consumers in the primary
mortgage market. We provide liquidity, stability and affordability to the U.S. housing market primarily by providing our
credit guarantee for residential mortgages originated by mortgage lenders and investing in mortgage loans and mortgage-
related securities. We use mortgage securitization as an integral part of our activities. Mortgage securitization is a process
by which we purchase mortgage loans that lenders originate, and pool these loans into guaranteed mortgage securities that
are sold in global capital markets, generating proceeds that support future loan origination activity by lenders. The
primary Freddie Mac guaranteed mortgage-related security is the single-class PC. We also aggregate and resecuritize
mortgage-related securities that are issued by us, other GSEs, HFAs, or private (non-agency) entities, and issue other
single-class and multiclass mortgage-related securities to third-party investors. We also enter into certain other guarantee
commitments for mortgage loans, HFA bonds under the HFA initiative, and multifamily housing revenue bonds held by
third parties.
     Our charter limits our purchases of single-family loans to the conforming loan market. The conforming loan market
is defined by loans originated with UPBs at or below limits determined annually based on changes in FHFA’s housing
price index, a method established and maintained by FHFA for determining the national average single-family home price.
Since 2006, the base conforming loan limit for a one-family residence has been set at $417,000, and higher limits have
been established in certain “high-cost” areas (currently, up to $625,500 for a one-family residence). Higher limits also
apply to two- to four-family residences and for mortgages secured by properties in Alaska, Guam, Hawaii, and the
U.S. Virgin Islands.
     Beginning in 2008, pursuant to a series of laws, our loan limits in certain high-cost areas were increased temporarily
above the limits that otherwise would have been applicable (up to $729,750 for a one-family residence). The latest of
these increases expired on September 30, 2011. We refer to loans that we have purchased with UPB exceeding the base
conforming loan limit (i.e., $417,000) as conforming jumbo loans.
     Our charter generally prohibits us from purchasing first-lien single-family mortgages if the outstanding UPB of the
mortgage at the time of our purchase exceeds 80% of the value of the property securing the mortgage unless we have one
of the following credit protections:
     • mortgage insurance from a mortgage insurer that we determine is qualified on the portion of the UPB of the
       mortgage that exceeds 80%;
     • a seller’s agreement to repurchase or replace any mortgage that has defaulted; or
     • retention by the seller of at least a 10% participation interest in the mortgage.
     Under our charter, our mortgage purchase operations are confined, so far as practicable, to mortgages that we deem
to be of such quality, type and class as to meet generally the purchase standards of other private institutional mortgage
investors. This is a general marketability standard.
     Our charter requirement for credit protection on mortgages with LTV ratios greater than 80% does not apply to
multifamily mortgages or to mortgages that have the benefit of any guarantee, insurance or other obligation by the U.S. or
any of its agencies or instrumentalities (e.g., the FHA, the VA or the USDA Rural Development).
     As part of HARP under the MHA Program, we may purchase single-family mortgages that refinance borrowers
whose mortgages we currently own or guarantee without obtaining additional credit enhancement in excess of that already
in place for any such loan, even if the LTV ratio of the new loan is above 80%.

Our Business Segments
     Our operations consist of three reportable segments, which are based on the type of business activities each
performs — Single-family Guarantee, Investments, and Multifamily. Certain activities that are not part of a reportable
segment are included in the All Other category.
     We evaluate segment performance and allocate resources based on a Segment Earnings approach. Beginning
January 1, 2010, we revised our method for presenting Segment Earnings to reflect changes in how management measures
and assesses the financial performance of each segment and the company as a whole. For more information on our
segments, including financial information, see “MD&A — CONSOLIDATED RESULTS OF OPERATIONS — Segment
Earnings” and “NOTE 14: SEGMENT REPORTING.”

Single-Family Guarantee Segment
     The Single-family Guarantee segment reflects results from our single-family credit guarantee activities. In our Single-
family Guarantee segment, we purchase single-family mortgage loans originated by our seller/servicers in the primary
                                                              11                                                 Freddie Mac
mortgage market. In most instances, we use the mortgage securitization process to package the purchased mortgage loans
into guaranteed mortgage-related securities. We guarantee the payment of principal and interest on the mortgage-related
security in exchange for management and guarantee fees.

Our Customers
    Our customers are predominantly lenders in the primary mortgage market that originate mortgages for homeowners.
These lenders include mortgage banking companies, commercial banks, savings banks, community banks, credit unions,
HFAs, and savings and loan associations.
     We acquire a significant portion of our mortgages from several large lenders. These lenders are among the largest
mortgage loan originators in the U.S. Since 2007, the mortgage industry has consolidated significantly and a smaller
number of large lenders originate most single-family mortgages. As a result, mortgage origination volume during 2011
was concentrated in a smaller number of institutions. During 2011, two mortgage lenders (Wells Fargo Bank, N.A. and
JPMorgan Chase Bank, N.A.) each accounted for more than 10% of our single-family mortgage purchase volume and
collectively accounted for approximately 40% of our single-family mortgage purchase volume. Our top ten lenders
accounted for approximately 82% of our single-family mortgage purchase volume during 2011.

     Our customers also service loans in our single-family credit guarantee portfolio. A significant portion of our single-
family mortgage loans are serviced by several of our large customers. Because we do not have our own servicing
operation, if our servicers lack appropriate process controls, experience a failure in their controls, or experience an
operating disruption in their ability to service mortgage loans, our business and financial results could be adversely
affected. For information about our relationships with our customers, see “MD&A — RISK MANAGEMENT — Credit
Risk — Institutional Credit Risk — Single-Family Mortgage Seller/Servicers.”

Our Competition

      Historically, our principal competitors have been Fannie Mae, Ginnie Mae and FHA/VA, and other financial
institutions that retain or securitize mortgages, such as commercial and investment banks, dealers, and thrift institutions.
Since 2008, most of our competitors, other than Fannie Mae, Ginnie Mae, and FHA/VA, have ceased their activities in the
residential mortgage securitization business or severely curtailed these activities relative to their previous levels. We
compete on the basis of price, products, the structure of our securities, and service. Competition to acquire single-family
mortgages can also be significantly affected by changes in our credit standards.

     Ginnie Mae, which became a more significant competitor beginning in 2009, guarantees the timely payment of
principal and interest on mortgage-related securities backed by federally insured or guaranteed loans, primarily those
insured by FHA or guaranteed by VA. Ginnie Mae maintained a significant market share in 2011 and 2010, in large part
due to favorable pricing of loans insured by FHA, the increase in the FHA loan limit and the availability, through FHA,
of a mortgage product for borrowers seeking greater than 80% financing who could not otherwise qualify for a
conventional mortgage.

     The conservatorship, including direction provided to us by our Conservator, and the restrictions on our activities
under the Purchase Agreement may affect our ability to compete in the business of securitizing mortgages. On multiple
occasions, FHFA has directed us and Fannie Mae to confer and suggest to FHFA possible uniform approaches to
particular business and accounting issues and problems. In most such cases, FHFA subsequently directed us and Fannie
Mae to adopt a specific uniform approach. It is possible that in some areas FHFA could require us and Fannie Mae to
take a uniform approach that, because of differences in our respective businesses, could place Freddie Mac at a
competitive disadvantage to Fannie Mae. For more information, see “RISK FACTORS — Conservatorship and Related
Matters — FHFA directives that we and Fannie Mae adopt uniform approaches in some areas could have an adverse
impact on our business or on our competitive position with respect to Fannie Mae.”

Overview of the Mortgage Securitization Process
     Mortgage securitization is a process by which we purchase mortgage loans that lenders originate, and pool these
loans into mortgage securities that are sold in global capital markets. The following diagram illustrates how we support
                                                             12                                                 Freddie Mac
mortgage market liquidity when we create PCs through mortgage securitizations. These PCs can be sold to investors or
held by us or our customers:



                                        Mortgage Securitizations



                                                                Investors




                                                                                  Cas
                                                PC




                                                                             PC


                                                                                    h
                                                      sh
                                                     Ca
                              Cash                              PC or Cash                             PC


                             Mortgage                           Mortgage                            Mortgage



             Homeowners                   Our Customers:                      Freddie Mac:                     PC Trusts
                                         Originate Loans with                Buys Mortgages
                                         Homeowners
                                                                             Guarantees PCs
                                         Sell or Exchange
                                                                             Retains Investments
                                         Mortgages for PCs or Cash
                                                                             in PCs and Mortgages
                                         Invest in PCs or Sell PCs
                                                                             Sells PCs to
                                         to Investors
                                                                             Investors




     The U.S. residential mortgage market consists of a primary mortgage market that links homebuyers and lenders and a
secondary mortgage market that links lenders and investors. We participate in the secondary mortgage market by
purchasing mortgage loans and mortgage-related securities for investment and by issuing guaranteed mortgage-related
securities. In the Single-family Guarantee segment, we purchase and securitize “single-family mortgages,” which are
mortgages that are secured by one- to four-family properties.
     In general, the securitization and Freddie Mac guarantee process works as follows: (a) a lender originates a mortgage
loan to a borrower purchasing a home or refinancing an existing mortgage loan; (b) we purchase the loan from the lender
and place it with other mortgages into a security that is sold to investors (this process is referred to as “pooling”); (c) the
lender may then use the proceeds from the sale of the loan or security to originate another mortgage loan; (d) we provide
a credit guarantee, for a fee (generally a portion of the interest collected on the mortgage loan), to those who invest in the
security; (e) the borrower’s monthly payment of mortgage principal and interest (net of a servicing fee and our
management and guarantee fee) is passed through to the investors in the security; and (f) if the borrower stops making
monthly payments — because a family member loses a job, for example — we step in and, pursuant to our guarantee,
make the applicable payments to investors in the security. In the event a borrower defaults on the mortgage, our servicer
works with the borrower to find a solution to help them stay in the home, or sell the property and avoid foreclosure,
through our many different workout options. If this is not possible, we ultimately foreclose and sell the home.

     The terms of single-family mortgages that we purchase or guarantee allow borrowers to prepay these loans, thereby
allowing borrowers to refinance their loans when mortgage rates decline. Because of the nature of long-term, fixed-rate
mortgages, borrowers with these mortgages are protected against rising interest rates, but are able to take advantage of
declining rates through refinancing. When a borrower prepays a mortgage that we have securitized, the outstanding
balance of the security owned by investors is reduced by the amount of the prepayment. Unscheduled reductions in loan
principal, regardless of whether they are voluntary or involuntary (e.g. foreclosure), result in prepayments of security
balances. Consequently, the owners of our guaranteed securities are subject to prepayment risk on the related mortgage
                                                                     13                                                Freddie Mac
loans, which is principally that the investor will receive an unscheduled return of the principal, and therefore may not earn
the rate of return originally expected on the investment.
     We guarantee these mortgage-related securities in exchange for compensation, which consists primarily of a
combination of management and guarantee fees paid on a monthly basis as a percentage of the UPB of the underlying
loans and initial upfront payments referred to as delivery fees. We may also make upfront payments to buy-up the
monthly management and guarantee fee rate, or receive upfront payments to buy-down the monthly management and
guarantee fee rate. These fees are paid in conjunction with the formation of a PC to provide for a uniform coupon rate for
the mortgage pool underlying the issued PC.
     We enter into mortgage purchase volume commitments with many of our single-family customers in order to have a
supply of loans for our guarantee business. These commitments provide for the lenders to deliver to us a certain volume
of mortgages during a specified period of time. Some commitments may also provide for the lender to deliver to us a
minimum percentage of their total sales of conforming loans. The purchase and securitization of mortgage loans from
customers under these contracts have pricing schedules for our management and guarantee fees that are negotiated at the
outset of the contract with initial terms that may range from one month to one year. We call these transactions “flow”
activity and they represent the majority of our purchase volumes. The remainder of our purchases and securitizations of
mortgage loans occurs in “bulk” transactions for which purchase prices and management and guarantee fees are
negotiated on an individual transaction basis. Mortgage purchase volumes from individual customers can fluctuate
significantly. If a mortgage lender fails to meet its contractual commitment, we have a variety of contractual remedies,
which may include the right to assess certain fees. Our mortgage purchase contracts contain no penalty or liquidated
damages clauses based on our inability to take delivery of presented mortgage loans. However, if we were to fail to meet
our contractual commitment, we could be deemed to be in breach of our contract and could be liable for damages in a
lawsuit.
     We seek to issue guarantees on our PCs with fee terms that we believe will, over the long-term, provide management
and guarantee fee income that exceeds our anticipated credit-related and administrative expenses on the underlying loans.
Historically, we have varied our guarantee and delivery fee pricing for different customers, mortgage products, and
mortgage or borrower underwriting characteristics based on our assessment of credit risk and loss mitigation related to
single-family loans. However, on December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut
Continuation Act of 2011. Among its provisions, this new law directs FHFA to require Freddie Mac and Fannie Mae to
increase guarantee fees by no less than 10 basis points above the average guarantee fees charged in 2011 on single-family
mortgage-backed securities. Under the law, the proceeds from this increase will be remitted to Treasury to fund the
payroll tax cut, rather than retained by the companies. See “Regulation and Supervision — Legislative and Regulatory
Developments” for further information on the impact of this new law. For more information on fees, see “MD&A — RISK
MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Other Credit Risk
Management Activities.”
   For information on how we account for our securitization activities, see “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES.”

Securitization Activities
      The types of mortgage-related securities we issue and guarantee include the following:
      • PCs;
      • REMICs and Other Structured Securities; and
      • Other Guarantee Transactions.

PCs
      Our PCs are single-class pass-through securities that represent undivided beneficial interests in trusts that hold pools
of mortgages we have purchased. Holding single-family loans in the form of PCs rather than as unsecuritized loans gives
us greater flexibility in managing the composition of our mortgage portfolio, as it is generally easier to purchase and sell
PCs than unsecuritized mortgage loans, and allows more cost effective interest-rate risk management. For our fixed-rate
PCs, we guarantee the timely payment of principal and interest. For our single-family ARM PCs, we guarantee the timely
payment of the weighted average coupon interest rate for the underlying mortgage loans. We also guarantee the full and
final payment of principal for ARM PCs; however, we do not guarantee the timely payment of principal on ARM PCs.
We issue most of our single-family PCs in transactions in which our customers provide us with mortgage loans in
                                                              14                                                 Freddie Mac
exchange for PCs. We refer to these transactions as guarantor swaps. The following diagram illustrates a guarantor swap
transaction:

                                                      Guarantor Swap
                                                                                       Guarantee
                                                                                                       Freddie Mac
                                                                 TRUST                                 (guarantor)
                                                                                          Fee

                                                               Mortgage         PC
                                                                loans



                                         Mortgage loans
                      Mortgage Lender                         Freddie Mac
                                              PC             (administrator)


                                                            Cash (Buy-ups)



                                                     Cash (Buy-downs, delivery fees)

    We also issue PCs in exchange for cash. The following diagram illustrates an exchange for cash in a “cash auction”
of PCs:

                                                    Cash Auction of PCs
                                                                                  Guarantee
                                                                                                      Freddie Mac
                                                               TRUST                                  (guarantor)
                                                                                       Fee

                                                               Mortgage      PC
                             CASH PURCHASE                      loans                     CASH AUCTION OF PC



                                         Mortgage loan                                  PC
                                                                                                   Securities Dealers
                      Mortgage Lender                       Freddie Mac
                                                                                                     and Investors
                                             Cash          (administrator)             Cash

                                                                Cash (Delivery fees)

     Institutional and other fixed-income investors, including pension funds, insurance companies, securities dealers,
money managers, commercial banks and foreign central banks, purchase our PCs. Treasury and the Federal Reserve have
also purchased mortgage-related securities issued by us, Fannie Mae and Ginnie Mae under their purchase programs. The
most recent of these programs ended in March 2010. During 2011, the Federal Reserve took several actions designed to
support an economic recovery and maintain historically low interest rates, including resumption of purchases of agency
securities, which impacted and will continue to impact the demand for and value of our PCs in the market.
     PCs differ from U.S. Treasury securities and other fixed-income investments in two ways. First, single-family PCs
can be prepaid at any time. Homeowners have the right to prepay their mortgage at any time (known as the prepayment
option), and homeowner mortgage prepayments are passed through to the PC holder. Consequently, our securities
implicitly have a call option that significantly reduces the average life of the security from the contractual loan maturity.
As a result, our PCs generally provide a higher nominal yield than certain other fixed-income products. Second, unlike
U.S. Treasury securities, PCs are not backed by the full faith and credit of the United States.
     In addition, in our Single-family Guarantee segment we historically sought to support the liquidity of the market for
our PCs and the relative price performance of our PCs to comparable Fannie Mae securities through a variety of activities,
including the resecuritization of PCs into REMICs and Other Structured Securities. Other strategies may include:
(a) encouraging sellers to pool mortgages that they deliver to us into PC pools with a larger and more diverse population
                                                                  15                                                    Freddie Mac
of mortgages; (b) influencing the volume and characteristics of mortgages delivered to us by tailoring our loan eligibility
guidelines and other means; and (c) engaging in portfolio purchase and retention activities. Beginning in 2012, under
guidance from FHFA we expect to curtail mortgage-related investments portfolio purchase and retention activities that are
undertaken for the primary purpose of supporting the price performance of our PCs, which may result in a significant
decline in the market share of our single-family guarantee business, lower comprehensive income, and a more rapid
decline in the size of our total mortgage portfolio. See “Investments Segment — PC Support Activities” and “RISK
FACTORS — Competitive and Market Risks — Any decline in the price performance of or demand for our PCs could
have an adverse effect on the volume and profitability of our new single-family guarantee business” for additional
information about our support of market liquidity for PCs.

REMICs and Other Structured Securities
      We issue single-class and multiclass securities. Single-class securities involve the straight pass-through of all of the
cash flows of the underlying collateral to holders of the beneficial interests. Our primary multiclass securities qualify for
tax treatment as REMICs. Multiclass securities divide all of the cash flows of the underlying mortgage-related assets into
two or more classes designed to meet the investment criteria and portfolio needs of different investors by creating classes
of securities with varying maturities, payment priorities and coupons, each of which represents a beneficial ownership
interest in a separate portion of the cash flows of the underlying collateral. Usually, the cash flows are divided to modify
the relative exposure of different classes to interest-rate risk, or to create various coupon structures. The simplest division
of cash flows is into principal-only and interest-only classes. Other securities we issue can involve the creation of
sequential payment and planned or targeted amortization classes. In a sequential payment class structure, one or more
classes receive all or a disproportionate percentage of the principal payments on the underlying mortgage assets for a
period of time until that class or classes are retired, following which the principal payments are directed to other classes.
Planned or targeted amortization classes involve the creation of classes that have relatively more predictable amortization
schedules across different prepayment scenarios, thus reducing prepayment risk, extension risk, or both.
     Our REMICs and Other Structured Securities represent beneficial interests in pools of PCs and/or certain other types
of mortgage-related assets. We create these securities primarily by using PCs or previously issued REMICs and Other
Structured Securities as the underlying collateral. Similar to our PCs, we guarantee the payment of principal and interest
to the holders of tranches of our REMICs and Other Structured Securities. We do not charge a management and guarantee
fee for these securities if the underlying collateral is already guaranteed by us since no additional credit risk is introduced.
Because the collateral underlying nearly all of our single-family REMICs and Other Structured Securities consists of other
mortgage-related securities that we guarantee, there are no concentrations of credit risk in any of the classes of these
securities that are issued, and there are no economic residual interests in the related securitization trust. The following
diagram provides a general example of how we create REMICs and Other Structured Securities.

                                    REMICs and Other Structured Securities

                                                                              TRUST



                                                                            PCs              Security
                                                                                             Classes



                                                         PCs
                                                                            Freddie Mac
                               Security Dealer      Transaction Fee
                                                                           (administrator)

                                                        Security
                                                        Classes

     We issue many of our REMICs and Other Structured Securities in transactions in which securities dealers or
investors sell us mortgage-related assets or we use our own mortgage-related assets (e.g., PCs and REMICs and Other
Structured Securities) in exchange for the REMICs and Other Structured Securities. The creation of REMICs and Other
Structured Securities allows for setting differing terms for specific classes of investors, and our issuance of these securities
can expand the range of investors in our mortgage-related securities to include those seeking specific security attributes.
For REMICs and Other Structured Securities that we issue to third parties, we typically receive a transaction, or
                                                                   16                                              Freddie Mac
resecuritization, fee. This transaction fee is compensation for facilitating the transaction, as well as future administrative
responsibilities.

Other Guarantee Transactions
     We also issue mortgage-related securities to third parties in exchange for non-Freddie Mac mortgage-related
securities. We refer to these as Other Guarantee Transactions. The non-Freddie Mac mortgage-related securities are
transferred to trusts that were specifically created for the purpose of issuing securities, or certificates, in the Other
Guarantee Transactions. The following diagram illustrates an example of an Other Guarantee Transaction:

                                            Other Guarantee Transaction


                                                                                 Guarantee
                                                             Freddie Mac                          Freddie Mac
                                                                Trust                              (guarantor)
                                                                                    Fee

                                                               Sr. Class    OGTC
                                                                and/or
                                                             Pass-through

                                        Mortgage loan                           Sub. Class
                                                                                               Securities Dealers
                 Mortgage Lender                            Private Label
                                                                                                 and Investors
                                        OGTC and Cash           Trust
                                                                                   Cash
                   OGTC          Cash


                     Investors
                    (which may
                  include Freddie
                       Mac)


              OGTC = Other Guarantee Transaction Certificates


      Other Guarantee Transactions can generally be segregated into two different types. In one type, we purchase only
senior tranches from a non-Freddie Mac senior-subordinated securitization, place the senior tranches into securitization
trusts, and issue Other Guarantee Transaction certificates guaranteeing the principal and interest payments on those
certificates. In this type of transaction, our credit risk is reduced by the structural credit protections from the related
subordinated tranches, which we do not guarantee. In the second type, we purchase single-class pass-through securities,
place them in securitization trusts, and issue Other Guarantee Transaction certificates guaranteeing the principal and
interest payments on those certificates. Our Other Guarantee Transactions backed by single-class pass-through securities
do not benefit from structural or other credit enhancement protections.
     Although Other Guarantee Transactions generally have underlying mortgage loans with varying risk characteristics,
we do not issue tranches that have concentrations of credit risk beyond those embedded in the underlying assets, as all
cash flows of the underlying collateral are passed through to the holders of the securities and there are no economic
residual interests in the securitization trusts. Additionally, there may be other credit enhancements and structural features
retained by the seller, such as excess interest or overcollateralization, that provide credit protection to our interests, and
reduce the likelihood that we will have to perform under our guarantee of the senior tranches. In exchange for providing
our guarantee, we may receive a management and guarantee fee or other delivery fees, if the underlying collateral is not
already guaranteed by us.
     In 2010 and 2009, we entered into transactions under Treasury’s NIBP with HFAs, for the partial guarantee of certain
single-family and multifamily HFA bonds, which were Other Guarantee Transactions with significant credit enhancement
provided by Treasury. While we did not engage in any of these transactions in 2011, we continue to participate in and
                                                               17                                                   Freddie Mac
support this program and these guarantees remain outstanding. The securities issued by us pursuant to the NIBP were
purchased by Treasury. See “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS — Housing Finance Agency
Initiative” for further information.
     For information about the amount of mortgage-related securities we have issued, see “Table 35 — Freddie Mac
Mortgage-Related Securities.” For information about the relative performance of mortgages underlying these securities,
refer to our “MD&A — RISK MANAGEMENT — Credit Risk” section.

Single-Family PC Trust Documents
     We establish trusts for all of our issued PCs pursuant to our PC master trust agreement. In accordance with the terms
of our PC trust documents, we have the option, and in some instances the requirement, to remove specified mortgage
loans from the trust. To remove these loans, we pay the trust an amount equal to the current UPB of the mortgage, less
any outstanding advances of principal that have been distributed to PC holders. Our payments to the trust are distributed
to the PC holders at the next scheduled payment date. From time to time, we reevaluate our practice of removing
delinquent loans from PCs and alter it if circumstances warrant. Our practice is to remove mortgages that are 120 days or
more delinquent from pools underlying our PCs when:
     • the mortgages have been modified;
     • foreclosure sales occur;
     • the mortgages are delinquent for 24 months; or
     • the cost of guarantee payments to PC holders, including advances of interest at the PC coupon rate, exceeds the
       expected cost of holding the nonperforming loans.
     In February 2010, we began the practice of removing substantially all 120 days or more delinquent single-family
mortgage loans from our issued PCs. This change in practice was made based on a determination that the cost of
guarantee payments to the security holders will exceed the cost of holding unsecuritized non-performing loans on our
consolidated balance sheets. The cost of holding unsecuritized non-performing loans on our consolidated balance sheets
was significantly affected by our January 1, 2010 adoption of amendments to certain accounting guidance and changing
economics pursuant to which the recognized cost of removing most delinquent loans from PC trusts was less than the
recognized cost of continued guarantee payments to security holders. See “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES — Recently Adopted Accounting Guidance” for additional information.
     In accordance with the terms of our PC trust documents, we are required to remove a mortgage loan (or, in some
cases, substitute a comparable mortgage loan) from a PC trust in the following situations:
     • if a court of competent jurisdiction or a federal government agency, duly authorized to oversee or regulate our
       mortgage purchase business, determines that our purchase of the mortgage was unauthorized and a cure is not
       practicable without unreasonable effort or expense, or if such a court or government agency requires us to
       repurchase the mortgage;
     • if a borrower exercises its option to convert the interest rate from an adjustable-rate to a fixed-rate on a convertible
       ARM; and
     • in the case of balloon-reset loans, shortly before the mortgage reaches it’s scheduled balloon-reset date.

The To Be Announced Market
      Because our fixed-rate single-family PCs are considered to be homogeneous, and are issued in high volume and are
highly liquid, they generally trade on a “generic” basis by PC coupon rate, also referred to as trading in the TBA market.
A TBA trade in Freddie Mac securities represents a contract for the purchase or sale of PCs to be delivered at a future
date; however, the specific PCs that will be delivered to fulfill the trade obligation, and thus the specific characteristics of
the mortgages underlying those PCs, are not known (i.e., “announced”) at the time of the trade, but only shortly before
the trade is settled. The use of the TBA market increases the liquidity of mortgage investments and improves the
distribution of investment capital available for residential mortgage financing, thereby helping us to accomplish our
statutory mission. The Securities Industry and Financial Markets Association publishes guidelines pertaining to the types
of mortgages that are eligible for TBA trades. Certain of our PC securities are not eligible for TBA trades, including those
backed by: (a) relief refinance mortgages with LTV ratios greater than 105%; and (b) previously modified mortgage loans
where the borrower has missed one or more monthly payments in a twelve month period.
                                                              18                                                   Freddie Mac
Underwriting Requirements and Quality Control Standards
      We use a process of delegated underwriting for the single-family mortgages we purchase or securitize. In this
process, our contracts with seller/servicers describe mortgage underwriting standards and the seller/servicers represent and
warrant to us that the mortgages sold to us meet these standards. In our contracts with individual seller/servicers, we may
waive or modify selected underwriting standards. Through our delegated underwriting process, mortgage loans and the
borrowers’ ability to repay the loans are evaluated using several critical risk characteristics, including, but not limited to,
the borrower’s credit score and credit history, the borrower’s monthly income relative to debt payments, the loan’s original
LTV ratio, the documentation level, the number of borrowers, the type of mortgage product, and the occupancy type of
the loan. We subsequently review a sample of these loans and, if we determine that any loan is not in compliance with
our contractual standards, we may require the seller/servicer to repurchase that mortgage. In lieu of a repurchase, we may
agree to allow a seller/servicer to indemnify us against loss in the event of a default by the borrower or enter into some
other remedy. During 2011 and 2010, we reviewed a significant number of loans that defaulted in order to assess the
sellers’ compliance with our purchase contracts. For more information on our seller/servicers’ repurchase obligations,
including recent performance under those obligations, see “MD&A — RISK MANAGEMENT — Credit Risk —
Institutional Credit Risk — Single-family Mortgage Seller/Servicers.”
      The majority of our single-family mortgage purchase volume is evaluated using an automated underwriting software
tool, either our tool (Loan Prospector), the seller/servicers’ own tool, or Fannie Mae’s tool. The percentage of our single-
family mortgage purchase flow activity volume evaluated by the loan originator using Loan Prospector prior to being
purchased by us was 41%, 39%, and 45% during 2011, 2010, and 2009, respectively. Beginning in 2009, we added a
number of additional credit standards for loans evaluated by other underwriting tools to improve the quality of loans we
purchase that are evaluated using these other tools. Consequently, we do not currently believe that the use of a tool other
than Loan Prospector significantly increases our loan performance risk.

Other Guarantee Commitments
     In certain circumstances, we provide our guarantee of mortgage-related assets held by third parties, in exchange for a
guarantee fee, without securitizing the related assets. For example, we provide long-term standby commitments to certain
of our single-family customers, which obligate us to purchase seriously delinquent loans that are covered by those
agreements. In addition, during 2010 and 2009, we issued guarantees under the TCLFP on securities backed by HFA
bonds as part of the HFA Initiative. See “NOTE 2: CONSERVATORSHIP AND RELATED MATTERS — Housing
Finance Agency Initiative” for further information.

Credit Enhancements
     Our charter requires that single-family mortgages with LTV ratios above 80% at the time of purchase be covered by
specified credit enhancements or participation interests. Primary mortgage insurance is the most prevalent type of credit
enhancement protecting our single-family credit guarantee portfolio, and is typically provided on a loan-level basis. In
addition, we employ other types of credit enhancements to further manage certain credit risk, including indemnification
agreements, collateral pledged by lenders and subordinated security structures. We also have pool insurance covering
certain single-family loans, though we did not purchase any pool insurance on single-family loans during 2011 or 2010.

Loss Mitigation and Loan Workout Activities
     Loan workout activities are a key component of our loss mitigation strategy for managing and resolving troubled
assets and lowering credit losses. Our single-family loss mitigation strategy emphasizes early intervention by servicers in
delinquent mortgages and provides alternatives to foreclosure. Other single-family loss mitigation activities include
providing our single-family servicers with default management tools designed to help them manage non-performing loans
more effectively and to assist borrowers in retaining home ownership where possible, or facilitate foreclosure alternatives
when continued homeownership is not an option. Loan workouts are intended to reduce the number of delinquent
mortgages that proceed to foreclosure and, ultimately, mitigate our total credit losses by reducing or eliminating a portion
of the costs related to foreclosed properties and avoiding the additional credit losses that likely would be incurred in a
REO sale.
     Our loan workouts include:
     • Forbearance agreements, where reduced payments or no payments are required during a defined period, generally
       less than one year. They provide additional time for the borrower to return to compliance with the original terms of
       the mortgage or to implement another loan workout. During 2011, the average time period granted for completed
                                                              19                                                  Freddie Mac
       short-term forbearance agreements was between two and four months. In January 2012, we announced new
       unemployment forbearance terms, which permit forbearance of up to 12 months for unemployed borrowers.
     • Repayment plans, which are contractual plans to make up past due amounts. They mitigate our credit losses
       because they assist borrowers in returning to compliance with the original terms of their mortgages. During 2011,
       the average time period granted for completed repayment plans was between two and five months.
     • Loan modifications, which may involve changing the terms of the loan, or adding outstanding indebtedness, such
       as delinquent interest, to the UPB of the loan, or a combination of both. We require our servicers to examine the
       borrower’s capacity to make payments under the new terms by reviewing the borrower’s qualifications, including
       income. During 2011, we granted principal forbearance but did not utilize principal forgiveness for our loan
       modifications. Principal forbearance is a change to a loan’s terms to designate a portion of the principal as non-
       interest -bearing. A borrower may only receive one HAMP modification, and loans may be modified once under
       other Freddie Mac loan modification programs. However, we reserve the right to approve subsequent non-HAMP
       loan modifications to the same borrower, based on the borrower’s individual facts and circumstances.
     • Short sale and deed in lieu of foreclosure transactions.
     In addition to these loan workout initiatives, our relief refinance opportunities, including HARP (which is the portion
of our relief refinance initiative for loans with LTV ratios above 80%), are a significant part of our effort to keep families
in their homes.
      In 2009, we began participating in HARP, which gives eligible homeowners (whose monthly payments are current)
with existing loans owned or guaranteed by us or Fannie Mae an opportunity to refinance into loans with more affordable
monthly payments and/or fixed-rate terms. Only borrowers with Freddie Mac owned or guaranteed mortgages are eligible
for our relief refinance mortgage initiative, which is our implementation of HARP. Through December 2011, under HARP,
eligible borrowers who had mortgages with current LTV ratios above 80% and up to 125% were allowed to refinance
their mortgages without obtaining new mortgage insurance in excess of what is already in place. On October 24, 2011,
FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to HARP in an effort to attract more
eligible borrowers who can benefit from refinancing their home mortgages. The revisions to HARP are available to
borrowers with loans that were sold to Freddie Mac and Fannie Mae on or before May 31, 2009 and who have current
LTV ratios above 80%. The program enhancements include:
     • eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages, and lowering fees for
       other borrowers;
     • removing the 125% LTV ratio ceiling for fixed-rate mortgages;
     • eliminating the requirement for lenders to provide us with certain representations and warranties that they would
       ordinarily be required to commit to in selling loans to us;
     • eliminating the need for a new property appraisal where there is a reliable automated valuation model estimate
       provided by the purchasing GSE; and
     • extending the end date for HARP until December 31, 2013.
     See “MD&A — RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-family Mortgage Credit
Risk — Single-Family Loan Workouts and the MHA Program” for additional information on our implementation of HARP
through our relief refinance mortgage initiative. For more information regarding credit risk, see “MD&A — RISK
MANAGEMENT — Credit Risk,” “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES,” and “NOTE 5:
INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS.”

Investments Segment
     The Investments segment reflects results from our investment, funding and hedging activities. In our Investments
segment, we invest principally in mortgage-related securities and single-family performing mortgage loans, which are
funded by other debt issuances and hedged using derivatives. In our Investments segment, we also provide funding and
hedging management services to the Single-family Guarantee and Multifamily segments. In the Investments segment, we
are not currently a substantial buyer or seller of mortgage assets.

Our Customers
     Our customers for our debt securities predominantly include insurance companies, money managers, central banks,
depository institutions, and pension funds. Within the Investments segment, we buy securities through various market
sources. We also invest in performing single-family mortgage loans, which we intend to aggregate and securitize. We
                                                              20                                                 Freddie Mac
purchase a significant portion of these loans from several lenders, as discussed in “Single-Family Guarantee Segment —
Our Customers.”

Our Competition
      Historically, our principal competitors have been Fannie Mae and other financial institutions that invest in mortgage-
related securities and mortgage loans, such as commercial and investment banks, dealers, thrift institutions, and insurance
companies. The conservatorship, including direction provided to us by our Conservator and the restrictions on our
activities under the Purchase Agreement has affected and will continue to affect our ability to compete in the business of
investing in mortgage-related securities and mortgage loans.
     We compete for low-cost debt funding with Fannie Mae, the FHLBs and other institutions. Competition for debt
funding from these entities can vary with changes in economic, financial market and regulatory environments.

Assets
     Historically, we have primarily been a buy-and-hold investor in mortgage-related securities and single-family
performing mortgage loans. We may sell assets to reduce risk, provide liquidity, and improve our returns. However, due to
limitations under the Purchase Agreement and those imposed by FHFA, our ability to acquire and sell mortgage assets is
significantly constrained. For more information, see “Conservatorship and Related Matters” and “MD&A —
CONSOLIDATED RESULTS OF OPERATIONS — Segment Earnings — Segment Earnings-Results — Investments.”
     We may enter into a variety of transactions to improve investment returns, including: (a) dollar roll transactions,
which are transactions in which we enter into an agreement to purchase and subsequently resell (or sell and subsequently
repurchase) agency securities; (b) purchases of agency securities (including agency REMICs); and (c) purchases of
performing single-family mortgage loans. In addition, we may create REMICs from existing agency securities and sell
tranches that are in demand by investors to reduce our asset balance, while conserving value for the taxpayer. We estimate
our expected investment returns using an OAS approach, which is an estimate of the yield spread between a given
financial instrument and a benchmark (LIBOR, agency or Treasury) yield curve. In this approach, we consider potential
variability in the instrument’s cash flows resulting from any options embedded in the instrument, such as the prepayment
option. Additionally, in this segment we hold reperforming and modified single-family mortgage loans related to our
single-family business. For our liquidity needs, we maintain a portfolio comprised primarily of cash and cash equivalents,
non-mortgage-related securities, and securities purchased under agreements to resell.

Debt Financing
     We fund our investment activities by issuing short-term and long-term debt. The conservatorship, and the resulting
support we receive from Treasury, has enabled us to access debt funding on terms sufficient for our needs. While we
believe that the support provided by Treasury pursuant to the Purchase Agreement currently enables us to maintain our
access to the debt markets and to have adequate liquidity to conduct our normal business activities, the costs of our debt
funding could vary due to the uncertainty about the future of the GSEs and potential investor concerns about the adequacy
of funding available under the Purchase Agreement after 2012. Additionally, the Purchase Agreement limits the amount of
indebtedness we can incur.
   For more information, see “Conservatorship and Related Matters” and “MD&A — LIQUIDITY AND CAPITAL
RESOURCES — Liquidity.”

Risk Management
     Our Investments segment has responsibility for managing our interest rate risk and certain liquidity risks. Derivatives
are an important part of our risk management strategy. We use derivatives primarily to: (a) regularly adjust or rebalance
our funding mix in response to changes in the interest-rate characteristics of our mortgage-related assets; (b) hedge
forecasted issuances of debt; (c) synthetically create callable and non-callable funding; and (d) hedge foreign-currency
exposure. For more information regarding our use of derivatives, see “QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK” and “NOTE 11: DERIVATIVES.” For information regarding our liquidity
management, see “MD&A — LIQUIDITY AND CAPITAL RESOURCES.”

PC Support Activities
     Our PCs are an integral part of our mortgage purchase program. Our Single-family Guarantee segment purchases
many of our mortgages by issuing PCs in exchange for those mortgage loans in guarantor swap transactions. We also
issue PCs backed by mortgage loans that we purchased for cash. Our competitiveness in purchasing single-family
                                                             21                                                 Freddie Mac
mortgages from our seller/servicers, and thus the volume and profitability of new single-family business, can be directly
affected by the relative price performance of our PCs and comparable Fannie Mae securities.
      Historically, we sought to support the liquidity of the market for our PCs and the relative price performance of our
PCs to comparable Fannie Mae securities through a variety of activities conducted by our Investments segment, including
the purchase and sale of Freddie Mac and other agency mortgage-related securities (e.g., dollar roll transactions), as well
as through the issuance of REMICs and Other Structured Securities. Our purchases and sales of mortgage-related
securities and our issuances of REMICs and Other Structured Securities influence the relative supply and demand for
these securities, helping to support the price performance of our PCs. Depending upon market conditions, including the
relative prices, supply of and demand for our mortgage-related securities and comparable Fannie Mae securities, as well
as other factors, there may be substantial variability in any period in the total amount of securities we purchase or sell,
and in the success of our efforts to support the liquidity and price performance of our mortgage-related securities.
Historically, we incurred costs to support the liquidity and price performance of our securities, including engaging in
transactions below our target rate of return. We may increase, reduce or discontinue these or other related activities at any
time, which could affect the liquidity and price performance of our mortgage-related securities. Beginning in 2012, under
guidance from FHFA we expect to curtail mortgage-related investments portfolio purchase and retention activities that are
undertaken for the primary purpose of supporting the price performance of our PCs, which may result in a significant
decline in the market share of our single-family guarantee business, lower comprehensive income, and a more rapid
decline in the size of our total mortgage portfolio. For more information, see “RISK FACTORS — Competitive and
Market Risks — Any decline in the price performance of or demand for our PCs could have an adverse effect on the
volume and profitability of our new single-family guarantee business.”

Multifamily Segment
     The Multifamily segment reflects results from our investment (both purchases and sales), securitization, and
guarantee activities in multifamily mortgage loans and securities. Although we hold multifamily mortgage loans and non-
agency CMBS that we purchased for investment, our purchases of such multifamily mortgage loans for investment have
declined significantly since 2010, and our purchases of CMBS have declined significantly since 2008. The only CMBS
that we have purchased since 2008 have been senior, mezzanine, and interest-only tranches related to certain of our
securitization transactions, and these purchases have not been significant. Currently, our primary business strategy is to
purchase multifamily mortgage loans for aggregation and then securitization. We guarantee the senior tranches of these
securitizations in Other Guarantee Transactions. Our Multifamily segment also issues Other Structured Securities, but does
not issue REMIC securities. Our Multifamily segment also enters into other guarantee commitments for multifamily HFA
bonds and housing revenue bonds held by third parties. Historically, we issued multifamily PCs, but this activity has been
insignificant in recent years.
     The multifamily property market is affected by local and regional economic factors, such as employment rates,
construction cycles, and relative affordability of single-family home prices, all of which influence the supply and demand
for multifamily properties and pricing for apartment rentals. Our multifamily loan volume is largely sourced through
established institutional channels where we are generally providing post-construction financing to larger apartment project
operators with established performance records.
     Our lending decisions are largely based on the assessment of the property’s ability to provide rents that will generate
sufficient operating cash flows to support payment of debt service obligations as measured by the expected DSCR and the
loan amount relative to the value of the property as measured by the LTV ratio. Multifamily mortgages generally are
without recourse to the borrower (i.e., the borrower is not personally liable for any deficiency remaining after foreclosure
and sale of the property), except in the event of fraud or certain other specified types of default. Therefore, repayment of
the mortgage depends on the ability of the underlying property to generate cash flows sufficient to cover the related debt
obligations. That in turn depends on conditions in the local rental market, local and regional economic conditions, the
physical condition of the property, the quality of property management, and the level of operating expenses.
     Prior to 2010, our Multifamily segment also reflected results from our investments in LIHTC partnerships formed for
the purpose of providing equity funding for affordable multifamily rental properties. In these investments, we provided
equity contributions to partnerships designed to sponsor the development and ongoing operations for low- and moderate-
income multifamily apartments. We planned to realize a return on our investment through reductions in income tax
expense that result from federal income tax credits and the deductibility of operating losses generated by the partnerships.
However, we no longer make investments in such partnerships because we do not expect to be able to use the underlying
federal income tax credits or the operating losses generated from the partnerships as a reduction to our taxable income
                                                             22                                                 Freddie Mac
because of our inability to generate sufficient taxable income or to sell these interests to third parties. See “NOTE 3:
VARIABLE INTEREST ENTITIES” for additional information.

Our Customers
     We acquire a significant portion of our multifamily mortgage loans from several large seller/servicers. For 2011, our
top two multifamily sellers, CBRE Capital Markets, Inc. and NorthMarq Capital, LLC, each accounted for more than 10%
of our multifamily purchase volume, and together accounted for approximately 32% of our multifamily purchase volume.
Our top 10 multifamily lenders represented an aggregate of approximately 81% of our multifamily purchase volume for
2011.
     A significant portion of our multifamily mortgage loans are serviced by several of our large customers. See
“MD&A — RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Seller/Servicers” for additional
information.

Our Competition
     Historically, our principal competitors have been Fannie Mae, FHA, and other financial institutions that retain or
securitize multifamily mortgages, such as commercial and investment banks, dealers, thrift institutions, and insurance
companies. During 2009, many of our competitors, other than Fannie Mae and FHA, significantly curtailed their activities
in the multifamily mortgage business relative to their previous levels. Beginning in 2010, some market participants began
to re-emerge in the multifamily market, and we have faced increased competition from some other institutional investors.
We compete on the basis of price, products, structure and service.

Underwriting Requirements and Quality Control Standards
      Our process and standards for underwriting multifamily mortgages differ from those used for single-family
mortgages. Unlike single-family mortgages, we generally do not use a delegated underwriting process for the multifamily
mortgages we purchase or securitize. Instead, we typically underwrite and evaluate each mortgage prior to purchase. This
process includes review of third-party appraisals and cash flow analysis. Our underwriting standards focus on loan quality
measurement based, in part, on the LTV ratio and DSCR at origination. The DSCR is one indicator of future credit
performance. The DSCR estimates a multifamily borrower’s ability to service its mortgage obligation using the secured
property’s cash flow, after deducting non-mortgage expenses from income. The higher the DSCR, the more likely a
multifamily borrower will be able to continue servicing its mortgage obligation. Our standards for multifamily loans
specify maximum original LTV ratio and minimum DSCR that vary based on the loan characteristics, such as loan type
(new acquisition or supplemental financing), loan term (intermediate or longer-term), and loan features (interest-only or
amortizing, fixed- or variable-rate). Since the beginning of 2009, our multifamily loans are generally underwritten with
requirements for a maximum original LTV ratio of 80% and a DSCR of greater than 1.25. In certain circumstances, our
standards for multifamily loans allow for certain types of loans to have an original LTV ratio over 80% and/or a DSCR of
less than 1.25, typically where this will serve our mission and contribute to achieving our affordable housing goals. In
cases where we commit to purchase or guarantee a permanent loan upon completion of construction or rehabilitation, we
generally require additional credit enhancements, because underwriting for these loans typically requires estimates of
future cash flows for calculating the DSCR that is expected after construction or rehabilitation is completed.
     We issue other guarantee commitments under which we guarantee payments under multifamily mortgages that back
tax-exempt bonds issued by state or local HFAs. In addition, we issue other guarantee commitments guaranteeing
payments on securities backed by such bonds. We underwrite the mortgages in these cases in the same manner as for
mortgages that we purchase.
     Multifamily seller/servicers make representations and warranties to us about the mortgage and about certain
information submitted to us in the underwriting process. We have the right to require that a seller/servicer repurchase a
multifamily mortgage for which there has been a breach of representation or warranty. However, because of our evaluation
of underwriting information for most multifamily properties prior to purchase, repurchases have been rare.
     We generally require multifamily seller/servicers to service mortgage loans they have sold to us in order to mitigate
potential losses. This includes property monitoring tasks beyond those typically performed by single-family servicers. We
do not oversee servicing with respect to multifamily loans we have securitized (i.e., those underlying our Other Guarantee
Transactions) as that oversight task is performed by subordinated bondholders. For loans over $1 million and where we
have servicing oversight, servicers must generally submit an annual assessment of the mortgaged property to us based on
the servicer’s analysis of financial and other information about the property. In situations where a borrower or property is
in distress, the frequency of communications with the borrower may be increased. Because the activities of multifamily
                                                             23                                                  Freddie Mac
seller/servicers are an important part of our loss mitigation process, we rate their performance regularly and may conduct
on-site reviews of their servicing operations in an effort to confirm compliance with our standards.
     For loans for which we oversee servicing, if a borrower is in distress, we may offer a workout option to the borrower.
For example, we may modify the terms of a multifamily mortgage loan, which gives the borrower an opportunity to bring
the loan current and retain ownership of the property. These arrangements are made with the expectation that we will
recover our initial investment or minimize our losses. We do not enter into these arrangements in situations where we
believe we would experience a loss in the future that is greater than or equal to the loss we would experience if we
foreclosed on the property at the time of the agreement.

Conservatorship and Related Matters
Overview and Entry into Conservatorship
    We have been operating under conservatorship, with FHFA acting as our conservator, since September 6, 2008. The
conservatorship and related matters have had a wide-ranging impact on us, including our regulatory supervision,
management, business, financial condition and results of operations.
     On September 7, 2008, the then Secretary of the Treasury and the then Director of FHFA announced several actions
taken by Treasury and FHFA regarding Freddie Mac and Fannie Mae. These actions included the execution of the
Purchase Agreement, pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase
common stock. At that time, FHFA set forth the purpose and goals of the conservatorship as follows: “The purpose of
appointing the Conservator is to preserve and conserve the company’s assets and property and to put the company in a
sound and solvent condition. The goals of the conservatorship are to help restore confidence in Fannie Mae and Freddie
Mac, enhance their capacity to fulfill their mission, and mitigate the systemic risk that has contributed directly to the
instability in the current market.” We refer to the Purchase Agreement and the warrant as the “Treasury Agreements.”
      There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified
termination date, and as to what changes may occur to our business structure during or following conservatorship,
including whether we will continue to exist. We are not aware of any current plans of our Conservator to significantly
change our business model or capital structure in the near-term. Our future structure and role will be determined by the
Administration and Congress, and there are likely to be significant changes beyond the near-term. We have no ability to
predict the outcome of these deliberations. On February 2, 2012, the Administration announced that it expects to provide
more detail concerning approaches to reform the U.S. housing finance market in the spring, and that it plans to begin
exploring options for legislation more intensively with Congress. On February 21, 2012, FHFA sent to Congress a
strategic plan for the next phase of the conservatorships of Freddie Mac and Fannie Mae.
      We receive substantial support from Treasury and FHFA, as our Conservator and regulator, and are dependent upon
their continued support in order to continue operating our business. This support includes our ability to access funds from
Treasury under the Purchase Agreement, which is critical to: (a) keeping us solvent; (b) allowing us to focus on our
primary business objectives under conservatorship; and (c) avoiding the appointment of a receiver by FHFA under
statutory mandatory receivership provisions. During 2011, the Federal Reserve took several actions designed to support an
economic recovery and maintain historically low interest rates, including resumption of purchases of agency securities,
which impacted and will continue to impact the demand for and value of our PCs in the market.
     Our annual dividend obligation on the senior preferred stock exceeds our annual historical earnings in all but one
period. Although we may experience period-to-period variability in earnings and comprehensive income, it is unlikely that
we will regularly generate net income or comprehensive income in excess of our annual dividends payable to Treasury. As
a result, there is significant uncertainty as to our long-term financial sustainability.
   For a description of certain risks to our business relating to the conservatorship and Treasury Agreements, see “RISK
FACTORS.”

Supervision of Our Company During Conservatorship
     Upon its appointment, FHFA, as Conservator, immediately succeeded to all rights, titles, powers and privileges of
Freddie Mac, and of any stockholder, officer or director of Freddie Mac with respect to Freddie Mac and its assets, and
succeeded to the title to all books, records and assets of Freddie Mac held by any other legal custodian or third party.
Under conservatorship, we have additional heightened supervision and direction from our regulator, FHFA, which is also
acting as our Conservator.
    During the conservatorship, the Conservator has delegated certain authority to the Board of Directors to oversee, and
to management to conduct, day-to-day operations so that the company can continue to operate in the ordinary course of
                                                            24                                                Freddie Mac
business. The directors serve on behalf of, and exercise authority as directed by, the Conservator. The Conservator retains
the authority to withdraw or revise its delegations of authority at any time. The Conservator also retained certain
significant authorities for itself, and did not delegate them to the Board. For more information on limitations on the
Board’s authority during conservatorship, see “DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE — Authority of the Board and Board Committees.”
     Because the Conservator succeeded to the powers, including voting rights, of our stockholders, who therefore do not
currently have voting rights of their own, we do not expect to hold stockholders’ meetings during the conservatorship, nor
will we prepare or provide proxy statements for the solicitation of proxies.
    We describe the powers of our Conservator in detail below under “Powers of the Conservator.”

Impact of Conservatorship and Related Actions on Our Business
    We conduct our business subject to the direction of FHFA as our Conservator. While the conservatorship has
benefited us through, for example, improved access to the debt markets because of the support we receive from Treasury,
we are also subject to certain constraints on our business activities by Treasury due to the terms of, and Treasury’s rights
under, the Purchase Agreement.
      While in conservatorship, we can, and have continued to, enter into and enforce contracts with third parties. The
Conservator continues to direct the efforts of the Board of Directors and management to address and determine the
strategic direction for the company. While the Conservator has delegated certain authority to management to conduct day-
to-day operations, many management decisions are subject to review and approval by FHFA and Treasury. In addition,
management frequently receives directions from FHFA on various matters involving day-to-day operations.
     Our business objectives and strategies have in some cases been altered since we were placed into conservatorship,
and may continue to change. Based on our charter, other legislation, public statements from Treasury and FHFA officials
and guidance and directives from our Conservator, we have a variety of different, and potentially competing, objectives,
including:
    • minimizing our credit losses;
    • conserving assets;
    • providing liquidity, stability and affordability in the mortgage market;
    • continuing to provide additional assistance to the struggling housing and mortgage markets;
    • managing to a positive stockholders’ equity and reducing the need to draw funds from Treasury pursuant to the
      Purchase Agreement; and
    • protecting the interests of taxpayers.
     These objectives create conflicts in strategic and day-to-day decision making that will likely lead to suboptimal
outcomes for one or more, or possibly all, of these objectives. We regularly receive direction from our Conservator on
how to pursue these objectives, including direction to focus our efforts on assisting homeowners in the housing and
mortgage markets. Given the important role the Administration and our Conservator have placed on Freddie Mac in
addressing housing and mortgage market conditions and our public mission, we may be required to take additional actions
that could have a negative impact on our business, operating results or financial condition. Because we expect many of
these objectives and related initiatives to result in significant costs, there is significant uncertainty as to the ultimate
impact these initiatives will have on our future capital or liquidity needs. Certain of these objectives are expected to help
homeowners and the mortgage market and may help to mitigate future credit losses. However, some of our initiatives are
expected to have an adverse impact on our near- and long-term financial results.
      Certain changes to our business objectives and strategies are designed to provide support for the mortgage market in
a manner that serves our public mission and other non-financial objectives, but may not contribute to profitability. Our
efforts to help struggling homeowners and the mortgage market, in line with our mission, may help to mitigate credit
losses, but in some cases may increase our expenses or require us to forego revenue opportunities in the near term. As a
result, in some cases the objective of reducing the need to draw funds from Treasury will be subordinated as we provide
this assistance. There is significant uncertainty as to the ultimate impact that our efforts to aid the housing and mortgage
markets will have on our future capital or liquidity needs and we cannot estimate whether, and the extent to which, costs
we incur in the near term as a result of these efforts, which for the most part we are not reimbursed for, will be offset by
the prevention or reduction of potential future costs.
                                                             25                                                 Freddie Mac
     The Conservator and Treasury also did not authorize us to engage in certain business activities and transactions,
including the purchase or sale of certain assets, which we believe might have had a beneficial impact on our results of
operations or financial condition, if executed. Our inability to execute such transactions may adversely affect our
profitability, and thus contribute to our need to draw additional funds from Treasury.
     The Conservator has stated that it is taking actions in support of the objectives of a gradual transition to greater
private capital participation in housing finance and greater distribution of risk to participants other than the government.
     These actions and objectives create risks and uncertainties that we discuss in “RISK FACTORS.” For more
information on the impact of conservatorship and our current business objectives, see “NOTE 2: CONSERVATORSHIP
AND RELATED MATTERS” and “Executive Summary — Our Primary Business Objectives.”

Limits on Investment Activity and Our Mortgage-Related Investments Portfolio
      The conservatorship has significantly impacted our investment activity. Under the terms of the Purchase Agreement
and FHFA regulation, our mortgage-related investments portfolio is subject to a cap that decreases by 10% each year until
the portfolio reaches $250 billion. As a result, the UPB of our mortgage-related investments portfolio could not exceed
$729 billion as of December 31, 2011 and may not exceed $656.1 billion as of December 31, 2012. FHFA has indicated
that such portfolio reduction targets should be viewed as minimum reductions and has encouraged us to reduce the
mortgage-related investments portfolio at a faster rate than required, consistent with FHFA guidance, safety and soundness
and the goal of conserving and preserving assets. We are also subject to limits on the amount of mortgage assets we can
sell in any calendar month without review and approval by FHFA and, if FHFA so determines, Treasury. We are working
with FHFA to identify ways to prudently accelerate the rate of contraction of the portfolio.
     The table below presents the UPB of our mortgage-related investments portfolio, for purposes of the limit imposed
by the Purchase Agreement and FHFA regulation.

Table 4 — Mortgage-Related Investments Portfolio(1)
                                                                                                                                                                 December 31, 2011      December 31, 2010
                                                                                                                                                                               (in millions)
Investments segment — Mortgage investments portfolio . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $449,273              $481,677
Single-family Guarantee segment — Single-family unsecuritized mortgage loans(2) .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         62,469                69,766
Multifamily segment — Mortgage investments portfolio . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        141,571               145,431
Total mortgage-related investments portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $653,313              $696,874

(1) Based on UPB and excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(2) Represents unsecuritized seriously delinquent single-family loans managed by the Single-family Guarantee segment.

     FHFA has stated that we will not be a substantial buyer or seller of mortgages for our mortgage-related investments
portfolio. FHFA also stated that, given the size of our current mortgage-related investments portfolio and the potential
volume of delinquent mortgages to be removed from PC pools, it expects that any net additions to our mortgage-related
investments portfolio would be related to that activity. We expect that our holdings of unsecuritized single-family loans
will continue to increase during 2012 due to the revisions to HARP, which will result in our purchase of mortgage loans
with LTV ratios greater than 125%, as we have not yet implemented a securitization process for such loans.
      Our mortgage-related investments portfolio includes assets that are less liquid than agency securities, including
unsecuritized performing single-family mortgage loans, multifamily mortgage loans, CMBS, and housing revenue bonds.
Our less liquid assets collectively represented approximately 32% of the UPB of the portfolio at December 31, 2011, as
compared to 30% as of December 31, 2010. Our mortgage-related investments portfolio also includes illiquid assets,
including unsecuritized seriously delinquent and modified single-family mortgage loans which we removed from PC
trusts, and our investments in non-agency mortgage-related securities backed by subprime, option ARM, and Alt-A and
other loans. Our illiquid assets collectively represented approximately 29% of the UPB of the portfolio at December 31,
2011, as compared to 27% as of December 31, 2010. The changing composition of our mortgage-related investments
portfolio to a greater proportion of illiquid assets may influence our decisions regarding funding and hedging. The
description above of the liquidity of our assets is based on our own internal expectations given current market conditions.
Changes in market conditions could continue to affect the liquidity of our assets at any given time.

Powers of the Conservator
     Under the GSE Act, the conservatorship provisions applicable to Freddie Mac are based generally on federal banking
law. As discussed below, FHFA has broad powers when acting as our conservator. For more information on the GSE Act,
see “Regulation and Supervision.”
                                                                                   26                                                                                                   Freddie Mac
General Powers of the Conservator
     Upon its appointment, the Conservator immediately succeeded to all rights, titles, powers and privileges of Freddie
Mac, and of any stockholder, officer or director of Freddie Mac with respect to Freddie Mac and its assets. The
Conservator also succeeded to the title to all books, records and assets of Freddie Mac held by any other legal custodian
or third party.
     Under the GSE Act, the Conservator may take any actions it determines are necessary and appropriate to carry on
our business, support public mission objectives, and preserve and conserve our assets and property. The Conservator’s
powers include the ability to transfer or sell any of our assets or liabilities (subject to certain limitations and post-transfer
notice provisions for transfers of qualified financial contracts, as defined below under “Special Powers of the
Conservator — Security Interests Protected; Exercise of Rights Under Qualified Financial Contracts”) without any
approval, assignment of rights or consent of any party. The GSE Act, however, provides that mortgage loans and
mortgage-related assets that have been transferred to a Freddie Mac securitization trust must be held for the beneficial
owners of the trust and cannot be used to satisfy our general creditors.
      Under the GSE Act, in connection with any sale or disposition of our assets, the Conservator must conduct its
operations to maximize the NPV return from the sale or disposition of such assets, to minimize the amount of any loss
realized in the resolution of cases, and to ensure adequate competition and fair and consistent treatment of offerors. The
Conservator is required to maintain a full accounting of the conservatorship and make its reports available upon request to
stockholders and members of the public.
     We remain liable for all of our obligations relating to our outstanding debt and mortgage-related securities. FHFA has
stated that our obligations will be paid in the normal course of business during the conservatorship.

Special Powers of the Conservator
Disaffirmance and Repudiation of Contracts
     Under the GSE Act, the Conservator may disaffirm or repudiate contracts (subject to certain limitations for qualified
financial contracts) that we entered into prior to its appointment as Conservator if it determines, in its sole discretion, that
performance of the contract is burdensome and that disaffirmance or repudiation of the contract promotes the orderly
administration of our affairs. The GSE Act requires FHFA to exercise its right to disaffirm or repudiate most contracts
within a reasonable period of time after its appointment as Conservator. In a final rule published in June 2011, FHFA
defines a reasonable period of time following appointment of a conservator or receiver to be 18 months. The Conservator
has advised us that it has no intention of repudiating any guarantee obligation relating to Freddie Mac’s mortgage-related
securities because it views repudiation as incompatible with the goals of the conservatorship. We can, and have continued
to, enter into, perform and enforce contracts with third parties.

Limitations on Enforcement of Contractual Rights by Counterparties
     The GSE Act provides that the Conservator may enforce most contracts entered into by us, notwithstanding any
provision of the contract that provides for termination, default, acceleration, or exercise of rights upon the appointment of,
or the exercise of rights or powers by, a conservator.

Security Interests Protected; Exercise of Rights Under Qualified Financial Contracts
     Notwithstanding the Conservator’s powers under the GSE Act described above, the Conservator must recognize
legally enforceable or perfected security interests, except where such an interest is taken in contemplation of our
insolvency or with the intent to hinder, delay or defraud us or our creditors. In addition, the GSE Act provides that no
person will be stayed or prohibited from exercising specified rights in connection with qualified financial contracts,
including termination or acceleration (other than solely by reason of, or incidental to, the appointment of the Conservator),
rights of offset, and rights under any security agreement or arrangement or other credit enhancement relating to such
contract. The term qualified financial contract means any securities contract, commodity contract, forward contract,
repurchase agreement, swap agreement, and any similar agreement as determined by FHFA by regulation, resolution or
order.

Avoidance of Fraudulent Transfers
     Under the GSE Act, the Conservator may avoid, or refuse to recognize, a transfer of any property interest of Freddie
Mac or of any of our debtors, and also may avoid any obligation incurred by Freddie Mac or by any debtor of Freddie
Mac, if the transfer or obligation was made: (a) within five years of September 6, 2008; and (b) with the intent to hinder,
delay, or defraud Freddie Mac, FHFA, the Conservator or, in the case of a transfer in connection with a qualified financial
                                                               27                                                    Freddie Mac
contract, our creditors. To the extent a transfer is avoided, the Conservator may recover, for our benefit, the property or,
by court order, the value of that property from the initial or subsequent transferee, other than certain transfers that were
made for value, including satisfaction or security of a present or antecedent debt, and in good faith. These rights are
superior to any rights of a trustee or any other party, other than a federal agency, under the U.S. bankruptcy code.

Modification of Statutes of Limitations
      Under the GSE Act, notwithstanding any provision of any contract, the statute of limitations with regard to any
action brought by the Conservator is: (a) for claims relating to a contract, the longer of six years or the applicable period
under state law; and (b) for tort claims, the longer of three years or the applicable period under state law, in each case,
from the later of September 6, 2008 or the date on which the cause of action accrues. In addition, notwithstanding the
state law statute of limitation for tort claims, the Conservator may bring an action for any tort claim that arises from
fraud, intentional misconduct resulting in unjust enrichment, or intentional misconduct resulting in substantial loss to us, if
the state’s statute of limitations expired not more than five years before September 6, 2008.

Suspension of Legal Actions
     Under the GSE Act, in any judicial action or proceeding to which we are or become a party, the Conservator may
request, and the applicable court must grant, a stay for a period not to exceed 45 days.

Treatment of Breach of Contract Claims
     Under the GSE Act, any final and unappealable judgment for monetary damages against the Conservator for breach
of an agreement executed or approved in writing by the Conservator will be paid as an administrative expense of the
Conservator.

Attachment of Assets and Other Injunctive Relief
     Under the GSE Act, the Conservator may seek to attach assets or obtain other injunctive relief without being required
to show that any injury, loss or damage is irreparable and immediate.

Subpoena Power
    The GSE Act provides the Conservator, with the approval of the Director of FHFA, with subpoena power for
purposes of carrying out any power, authority or duty with respect to Freddie Mac.

Treasury Agreements
     The Reform Act granted Treasury temporary authority (through December 31, 2009) to purchase any obligations and
other securities issued by Freddie Mac on such terms and conditions and in such amounts as Treasury may determine,
upon mutual agreement between Treasury and Freddie Mac. Pursuant to this authority, Treasury entered into several
agreements with us, as described below.

Purchase Agreement and Related Issuance of Senior Preferred Stock and Common Stock Warrant
Purchase Agreement
     On September 7, 2008, we, through FHFA, in its capacity as Conservator, and Treasury entered into the Purchase
Agreement. The Purchase Agreement was subsequently amended and restated on September 26, 2008, and further
amended on May 6, 2009 and December 24, 2009. Pursuant to the Purchase Agreement, on September 8, 2008 we issued
to Treasury: (a) one million shares of Variable Liquidation Preference Senior Preferred Stock (with an initial liquidation
preference of $1 billion), which we refer to as the senior preferred stock; and (b) a warrant to purchase, for a nominal
price, shares of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a
fully diluted basis at the time the warrant is exercised, which we refer to as the warrant. The terms of the senior preferred
stock and warrant are summarized in separate sections below. We did not receive any cash proceeds from Treasury as a
result of issuing the senior preferred stock or the warrant. However, deficits in our net worth have made it necessary for
us to make substantial draws on Treasury’s funding commitment under the Purchase Agreement. As a result, the aggregate
liquidation preference of the senior preferred stock has increased from $1.0 billion as of September 8, 2008 to
$72.2 billion at December 31, 2011 (this figure reflects the receipt of funds requested in the draw to address our net worth
deficit as of September 30, 2011). Our dividend obligation on the senior preferred stock, based on that liquidation
preference, is $7.22 billion, which exceeds our annual earnings in all but one period.
      The senior preferred stock and warrant were issued to Treasury as an initial commitment fee in consideration of the
initial commitment from Treasury to provide up to $100 billion (subsequently increased to $200 billion) in funds to us
                                                              28                                                  Freddie Mac
under the terms and conditions set forth in the Purchase Agreement. Under the Purchase Agreement, the $200 billion
maximum amount of the commitment from Treasury will increase as necessary to accommodate any cumulative reduction
in our net worth during 2010, 2011 and 2012. If we do not have a capital surplus (i.e., positive net worth) at the end of
2012, then the amount of funding available after 2012 will be $149.3 billion ($200 billion funding commitment reduced
by cumulative draws for net worth deficits through December 31, 2009). In the event we have a capital surplus at the end
of 2012, then the amount of funding available after 2012 will depend on the size of that surplus relative to cumulative
draws needed for deficits during 2010 to 2012, as follows:
    • If the year-end 2012 surplus is lower than the cumulative draws needed for 2010 to 2012, then the amount of
      available funding is $149.3 billion less the surplus.
    • If the year-end 2012 surplus exceeds the cumulative draws for 2010 to 2012, then the amount of available funding
      is $149.3 billion less the amount of those draws.
     In addition to the issuance of the senior preferred stock and warrant, we are required under the Purchase Agreement
to pay a quarterly commitment fee to Treasury. Under the Purchase Agreement, the fee is to be determined in an amount
mutually agreed to by us and Treasury with reference to the market value of Treasury’s funding commitment as then in
effect, and reset every five years. We may elect to pay the quarterly commitment fee in cash or add the amount of the fee
to the liquidation preference of the senior preferred stock. Treasury may waive the quarterly commitment fee for up to
one year at a time, in its sole discretion, based on adverse conditions in the U.S. mortgage market. The fee was originally
scheduled to begin accruing on January 1, 2010 (with the first fee payable on March 31, 2010), but was delayed until
January 1, 2011 (with the first fee payable on March 31, 2011) pursuant to an amendment to the Purchase Agreement.
Treasury waived the fee for all quarters of 2011 and the first quarter of 2012, but has indicated that it remains committed
to protecting taxpayers and ensuring that our future positive earnings are returned to taxpayers as compensation for their
investment. Treasury stated that it would reevaluate whether the quarterly commitment fee should be set in the second
quarter of 2012. Absent Treasury waiving the commitment fee in the second quarter of 2012, this quarterly commitment
fee will begin accruing on April 1, 2012 and must be paid each quarter for as long as the Purchase Agreement is in effect.
The amount of the fee has not yet been determined and could be substantial.
     The Purchase Agreement provides that, on a quarterly basis, we generally may draw funds up to the amount, if any,
by which our total liabilities exceed our total assets, as reflected on our GAAP balance sheet for the applicable fiscal
quarter (referred to as the deficiency amount), provided that the aggregate amount funded under the Purchase Agreement
may not exceed Treasury’s commitment. The Purchase Agreement provides that the deficiency amount will be calculated
differently if we become subject to receivership or other liquidation process. The deficiency amount may be increased
above the otherwise applicable amount upon our mutual written agreement with Treasury. In addition, if the Director of
FHFA determines that the Director will be mandated by law to appoint a receiver for us unless our capital is increased by
receiving funds under the commitment in an amount up to the deficiency amount (subject to the maximum amount that
may be funded under the agreement), then FHFA, in its capacity as our Conservator, may request that Treasury provide
funds to us in such amount. The Purchase Agreement also provides that, if we have a deficiency amount as of the date of
completion of the liquidation of our assets, we may request funds from Treasury in an amount up to the deficiency
amount (subject to the maximum amount that may be funded under the agreement). Any amounts that we draw under the
Purchase Agreement will be added to the liquidation preference of the senior preferred stock. No additional shares of
senior preferred stock are required to be issued under the Purchase Agreement. As a result, the expiration on
December 31, 2009 of Treasury’s temporary authority to purchase obligations and other securities issued by Freddie Mac
did not affect Treasury’s funding commitment under the Purchase Agreement.
     Under the Purchase Agreement, our ability to repay the liquidation preference of the senior preferred stock is limited
and we will not be able to do so for the foreseeable future, if at all. The amounts payable for dividends on the senior
preferred stock are substantial and will have an adverse impact on our financial position and net worth. The payment of
dividends on our senior preferred stock in cash reduces our net worth. For periods in which our earnings and other
changes in equity do not result in positive net worth, draws under the Purchase Agreement effectively fund the cash
payment of senior preferred dividends to Treasury. It is unlikely that, over the long-term, we will generate net income or
comprehensive income in excess of our annual dividends payable to Treasury, although we may experience period-to-
period variability in earnings and comprehensive income. As a result, we expect to make additional draws in future
periods.
     The Purchase Agreement provides that the Treasury’s funding commitment will terminate under any of the following
circumstances: (a) the completion of our liquidation and fulfillment of Treasury’s obligations under its funding
commitment at that time; (b) the payment in full of, or reasonable provision for, all of our liabilities (whether or not
                                                            29                                                 Freddie Mac
contingent, including mortgage guarantee obligations); and (c) the funding by Treasury of the maximum amount of the
commitment under the Purchase Agreement. In addition, Treasury may terminate its funding commitment and declare the
Purchase Agreement null and void if a court vacates, modifies, amends, conditions, enjoins, stays or otherwise affects the
appointment of the Conservator or otherwise curtails the Conservator’s powers. Treasury may not terminate its funding
commitment under the Purchase Agreement solely by reason of our being in conservatorship, receivership or other
insolvency proceeding, or due to our financial condition or any adverse change in our financial condition.
     The Purchase Agreement provides that most provisions of the agreement may be waived or amended by mutual
written agreement of the parties; however, no waiver or amendment of the agreement is permitted that would decrease
Treasury’s aggregate funding commitment or add conditions to Treasury’s funding commitment if the waiver or
amendment would adversely affect in any material respect the holders of our debt securities or Freddie Mac mortgage
guarantee obligations.
      In the event of our default on payments with respect to our debt securities or Freddie Mac mortgage guarantee
obligations, if Treasury fails to perform its obligations under its funding commitment and if we and/or the Conservator are
not diligently pursuing remedies in respect of that failure, the holders of these debt securities or Freddie Mac mortgage
guarantee obligations may file a claim in the United States Court of Federal Claims for relief requiring Treasury to fund
to us the lesser of: (a) the amount necessary to cure the payment defaults on our debt and Freddie Mac mortgage
guarantee obligations; and (b) the lesser of: (i) the deficiency amount; and (ii) the maximum amount of the commitment
less the aggregate amount of funding previously provided under the commitment. Any payment that Treasury makes under
those circumstances will be treated for all purposes as a draw under the Purchase Agreement that will increase the
liquidation preference of the senior preferred stock.
     The Purchase Agreement has an indefinite term and can terminate only in limited circumstances, which do not
include the end of the conservatorship. The Purchase Agreement therefore could continue after the conservatorship ends.

Issuance of Senior Preferred Stock
     Shares of the senior preferred stock have a par value of $1, and have a stated value and initial liquidation preference
equal to $1,000 per share. The liquidation preference of the senior preferred stock is subject to adjustment. Dividends that
are not paid in cash for any dividend period will accrue and be added to the liquidation preference of the senior preferred
stock. In addition, any amounts Treasury pays to us pursuant to its funding commitment under the Purchase Agreement
and any quarterly commitment fees that are not paid in cash to Treasury nor waived by Treasury will be added to the
liquidation preference of the senior preferred stock. As described below, we may make payments to reduce the liquidation
preference of the senior preferred stock in limited circumstances.
     Treasury, as the holder of the senior preferred stock, is entitled to receive, when, as and if declared by our Board of
Directors, cumulative quarterly cash dividends at the annual rate of 10% per year on the then-current liquidation
preference of the senior preferred stock. Through December 31, 2011, we have paid cash dividends of $16.5 billion at the
direction of the Conservator. If at any time we fail to pay cash dividends in a timely manner, then immediately following
such failure and for all dividend periods thereafter until the dividend period following the date on which we have paid in
cash full cumulative dividends (including any unpaid dividends added to the liquidation preference), the dividend rate will
be 12% per year.
     The senior preferred stock is senior to our common stock and all other outstanding series of our preferred stock, as
well as any capital stock we issue in the future, as to both dividends and rights upon liquidation. The senior preferred
stock provides that we may not, at any time, declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any common stock or other securities ranking junior
to the senior preferred stock unless: (a) full cumulative dividends on the outstanding senior preferred stock (including any
unpaid dividends added to the liquidation preference) have been declared and paid in cash; and (b) all amounts required to
be paid with the net proceeds of any issuance of capital stock for cash (as described in the following paragraph) have
been paid in cash. Shares of the senior preferred stock are not convertible. Shares of the senior preferred stock have no
general or special voting rights, other than those set forth in the certificate of designation for the senior preferred stock or
otherwise required by law. The consent of holders of at least two-thirds of all outstanding shares of senior preferred stock
is generally required to amend the terms of the senior preferred stock or to create any class or series of stock that ranks
prior to or on parity with the senior preferred stock.
     We are not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment
set forth in the Purchase Agreement; however, we are permitted to pay down the liquidation preference of the outstanding
shares of senior preferred stock to the extent of: (a) accrued and unpaid dividends previously added to the liquidation
                                                              30                                                  Freddie Mac
preference and not previously paid down; and (b) quarterly commitment fees previously added to the liquidation
preference and not previously paid down. In addition, if we issue any shares of capital stock for cash while the senior
preferred stock is outstanding, the net proceeds of the issuance must be used to pay down the liquidation preference of the
senior preferred stock; however, the liquidation preference of each share of senior preferred stock may not be paid down
below $1,000 per share prior to the termination of Treasury’s funding commitment. Following the termination of
Treasury’s funding commitment, we may pay down the liquidation preference of all outstanding shares of senior preferred
stock at any time, in whole or in part. If, after termination of Treasury’s funding commitment, we pay down the
liquidation preference of each outstanding share of senior preferred stock in full, the shares will be deemed to have been
redeemed as of the payment date.

Issuance of Common Stock Warrant
     The warrant gives Treasury the right to purchase shares of our common stock equal to 79.9% of the total number of
shares of our common stock outstanding on a fully diluted basis on the date of exercise. The warrant may be exercised in
whole or in part at any time on or before September 7, 2028, by delivery to us of: (a) a notice of exercise; (b) payment of
the exercise price of $0.00001 per share; and (c) the warrant. If the market price of one share of our common stock is
greater than the exercise price, then, instead of paying the exercise price, Treasury may elect to receive shares equal to the
value of the warrant (or portion thereof being canceled) pursuant to the formula specified in the warrant. Upon exercise of
the warrant, Treasury may assign the right to receive the shares of common stock issuable upon exercise to any other
person.
     As of March 9, 2012, Treasury has not exercised the warrant.

Covenants Under Treasury Agreements
    The Purchase Agreement and warrant contain covenants that significantly restrict our business activities. For
example, as a result of these covenants, we can no longer obtain additional equity financing (other than pursuant to the
Purchase Agreement) and we are limited in the amount and type of debt financing we may obtain.

Purchase Agreement Covenants
    The Purchase Agreement provides that, until the senior preferred stock is repaid or redeemed in full, we may not,
without the prior written consent of Treasury:
     • declare or pay any dividend (preferred or otherwise) or make any other distribution with respect to any Freddie
       Mac equity securities (other than with respect to the senior preferred stock or warrant);
     • redeem, purchase, retire or otherwise acquire any Freddie Mac equity securities (other than the senior preferred
       stock or warrant);
     • sell or issue any Freddie Mac equity securities (other than the senior preferred stock, the warrant and the common
       stock issuable upon exercise of the warrant and other than as required by the terms of any binding agreement in
       effect on the date of the Purchase Agreement);
     • terminate the conservatorship (other than in connection with a receivership);
     • sell, transfer, lease or otherwise dispose of any assets, other than dispositions for fair market value: (a) to a limited
       life regulated entity (in the context of a receivership); (b) of assets and properties in the ordinary course of
       business, consistent with past practice; (c) in connection with our liquidation by a receiver; (d) of cash or cash
       equivalents for cash or cash equivalents; or (e) to the extent necessary to comply with the covenant described
       below relating to the reduction of our mortgage-related investments portfolio;
     • issue any subordinated debt;
     • enter into a corporate reorganization, recapitalization, merger, acquisition or similar event; or
     • engage in transactions with affiliates unless the transaction is: (a) pursuant to the Purchase Agreement, the senior
       preferred stock or the warrant; (b) upon arm’s length terms; or (c) a transaction undertaken in the ordinary course
       or pursuant to a contractual obligation or customary employment arrangement in existence on the date of the
       Purchase Agreement.
     These covenants also apply to our subsidiaries.
    The Purchase Agreement also provides that we may not own mortgage assets with UPB in excess of: (a) $900 billion
on December 31, 2009; or (b) on December 31 of each year thereafter, 90% of the aggregate amount of mortgage assets
we are permitted to own as of December 31 of the immediately preceding calendar year, provided that we are not
                                                               31                                                  Freddie Mac
required to own less than $250 billion in mortgage assets. Under the Purchase Agreement, we also may not incur
indebtedness that would result in the par value of our aggregate indebtedness exceeding 120% of the amount of mortgage
assets we are permitted to own on December 31 of the immediately preceding calendar year. The mortgage asset and
indebtedness limitations are determined without giving effect to the changes to the accounting guidance for transfers of
financial assets and consolidation of VIEs, under which we consolidated our single-family PC trusts and certain of our
Other Guarantee Transactions in our financial statements as of January 1, 2010.
     In addition, the Purchase Agreement provides that we may not enter into any new compensation arrangements or
increase amounts or benefits payable under existing compensation arrangements of any named executive officer or other
executive officer (as such terms are defined by SEC rules) without the consent of the Director of FHFA, in consultation
with the Secretary of the Treasury.
     As of March 9, 2012, we believe we were in compliance with the covenants under the Purchase Agreement.

Warrant Covenants
     The warrant we issued to Treasury includes, among others, the following covenants: (a) we may not permit any of
our significant subsidiaries to issue capital stock or equity securities, or securities convertible into or exchangeable for
such securities, or any stock appreciation rights or other profit participation rights; (b) we may not take any action to
avoid the observance or performance of the terms of the warrant and we must take all actions necessary or appropriate to
protect Treasury’s rights against impairment or dilution; and (c) we must provide Treasury with prior notice of specified
actions relating to our common stock, such as setting a record date for a dividend payment, granting subscription or
purchase rights, authorizing a recapitalization, reclassification, merger or similar transaction, commencing a liquidation of
the company or any other action that would trigger an adjustment in the exercise price or number or amount of shares
subject to the warrant.
     As of March 9, 2012, we believe we were in compliance with the covenants under the warrant.

Effect of Conservatorship and Treasury Agreements on Existing Stockholders
     The conservatorship, the Purchase Agreement and the senior preferred stock and warrant issued to Treasury have
materially limited the rights of our common and preferred stockholders (other than Treasury as holder of the senior
preferred stock) and had a number of adverse effects on our common and preferred stockholders. See “RISK
FACTORS — Conservatorship and Related Matters — The conservatorship and investment by Treasury has had, and will
continue to have, a material adverse effect on our common and preferred stockholders.”
     As described above, the conservatorship and Treasury Agreements also impact our business in ways that indirectly
affect our common and preferred stockholders. By their terms, the Purchase Agreement, senior preferred stock and
warrant will continue to exist even if we are released from the conservatorship. For a description of the risks to our
business relating to the conservatorship and Treasury Agreements, see “RISK FACTORS.”

Regulation and Supervision
     In addition to our oversight by FHFA as our Conservator, we are subject to regulation and oversight by FHFA under
our charter and the GSE Act, which was modified substantially by the Reform Act. We are also subject to certain
regulation by other government agencies.

Federal Housing Finance Agency
     FHFA is an independent agency of the federal government responsible for oversight of the operations of Freddie
Mac, Fannie Mae and the FHLBs. The Director of FHFA is appointed by the President and confirmed by the Senate for a
five-year term, removable only for cause. In the discussion below, we refer to Freddie Mac and Fannie Mae as the
“enterprises.”
    The Federal Housing Finance Oversight Board, or the Oversight Board, is responsible for advising the Director of
FHFA with respect to overall strategies and policies. The Oversight Board consists of the Director of FHFA as
Chairperson, the Secretary of the Treasury, the Chair of the SEC and the Secretary of HUD.
     Under the GSE Act, FHFA has safety and soundness authority that is comparable to, and in some respects, broader
than that of the federal banking agencies. The GSE Act also provides FHFA with powers that, even if we were not in
conservatorship, include the authority to raise capital levels above statutory minimum levels, regulate the size and content
of our mortgage-related investments portfolio, and approve new mortgage products.
                                                             32                                                  Freddie Mac
    FHFA is responsible for implementing the various provisions of the GSE Act that were added by the Reform Act. In
general, we remain subject to existing regulations, orders and determinations until new ones are issued or made.

Receivership
     Under the GSE Act, FHFA must place us into receivership if FHFA determines in writing that our assets are less than
our obligations for a period of 60 days. FHFA has notified us that the measurement period for any mandatory receivership
determination with respect to our assets and obligations would commence no earlier than the SEC public filing deadline
for our quarterly or annual financial statements and would continue for 60 calendar days after that date. FHFA has also
advised us that, if, during that 60-day period, we receive funds from Treasury in an amount at least equal to the
deficiency amount under the Purchase Agreement, the Director of FHFA will not make a mandatory receivership
determination.
     In addition, we could be put into receivership at the discretion of the Director of FHFA at any time for other reasons,
including conditions that FHFA has already asserted existed at the time the then Director of FHFA placed us into
conservatorship. These include: (a) a substantial dissipation of assets or earnings due to unsafe or unsound practices;
(b) the existence of an unsafe or unsound condition to transact business; (c) an inability to meet our obligations in the
ordinary course of business; (d) a weakening of our condition due to unsafe or unsound practices or conditions; (e) critical
undercapitalization; (f) the likelihood of losses that will deplete substantially all of our capital; or (g) by consent.
     On June 20, 2011, FHFA published a final rule that addresses conservatorship and receivership operations of Freddie
Mac, Fannie Mae and the FHLBs. The final rule establishes a framework to be used by FHFA when acting as conservator
or receiver, supplementing and clarifying statutory authorities. Among other provisions, the final rule indicates that FHFA
will not permit payment of securities litigation claims during conservatorship and that claims by current or former
shareholders arising as a result of their status as shareholders would receive the lowest priority of claim in receivership. In
addition, the final rule indicates that administrative expenses of the conservatorship will also be deemed to be
administrative expenses of a subsequent receivership and that capital distributions may not be made during
conservatorship, except as specified in the final rule.

Capital Standards
     FHFA has suspended capital classification of us during conservatorship in light of the Purchase Agreement. The
existing statutory and FHFA-directed regulatory capital requirements are not binding during the conservatorship. We
continue to provide our submission to FHFA on minimum capital. FHFA continues to publish relevant capital figures
(minimum capital requirement, core capital, and GAAP net worth) but does not publish our critical capital, risk-based
capital or subordinated debt levels during conservatorship.
      On October 9, 2008, FHFA also announced that it will engage in rulemaking to revise our minimum capital and risk-
based capital requirements. The GSE Act provides that FHFA may increase minimum capital levels from the existing
statutory percentages either by regulation or on a temporary basis by order. On March 3, 2011, FHFA issued a final rule
setting forth procedures and standards for such a temporary increase in minimum capital levels. FHFA may also, by
regulation or order, establish capital or reserve requirements with respect to any product or activity of an enterprise, as
FHFA considers appropriate. In addition, under the GSE Act, FHFA must, by regulation, establish risk-based capital
requirements to ensure the enterprises operate in a safe and sound manner, maintaining sufficient capital and reserves to
support the risks that arise in their operations and management. In developing the new risk-based capital requirements,
FHFA is not bound by the risk-based capital standards in effect prior to the amendment of the GSE Act by the Reform
Act.
     Our regulatory minimum capital is a leverage-based measure that is generally calculated based on GAAP and reflects
a 2.50% capital requirement for on-balance sheet assets and 0.45% capital requirement for off-balance sheet obligations.
Pursuant to regulatory guidance from FHFA, our minimum capital requirement was not automatically affected by our
January 1, 2010 adoption of amendments to the accounting guidance for transfers of financial assets and consolidation of
VIEs. Specifically, upon adoption of this accounting guidance, FHFA directed us, for purposes of minimum capital, to
continue reporting our PCs held by third parties and other aggregate off-balance sheet obligations using a 0.45% capital
requirement. Notwithstanding this guidance, FHFA reserves the authority under the GSE Act to raise the minimum capital
requirement for any of our assets or activities.
     For additional information, see “MD&A — LIQUIDITY AND CAPITAL RESOURCES — Capital Resources” and
“NOTE 15: REGULATORY CAPITAL.” Also, see “RISK FACTORS — Legal and Regulatory Risks” for more
information.
                                                              33                                                  Freddie Mac
New Products
     The GSE Act requires the enterprises to obtain the approval of FHFA before initially offering any product, subject to
certain exceptions. The GSE Act provides for a public comment process on requests for approval of new products. FHFA
may temporarily approve a product without soliciting public comment if delay would be contrary to the public interest.
FHFA may condition approval of a product on specific terms, conditions and limitations. The GSE Act also requires the
enterprises to provide FHFA with written notice of any new activity that we or Fannie Mae consider not to be a product.
      On July 2, 2009, FHFA published an interim final rule on prior approval of new products, implementing the new
product provisions for us and Fannie Mae in the GSE Act. The rule establishes a process for Freddie Mac and Fannie
Mae to provide prior notice to the Director of FHFA of a new activity and, if applicable, to obtain prior approval from the
Director if the new activity is determined to be a new product. On August 31, 2009, Freddie Mac and Fannie Mae filed
joint public comments on the interim final rule with FHFA. FHFA has stated that permitting us to engage in new products
is inconsistent with the goals of conservatorship and has instructed us not to submit such requests under the interim final
rule. This could have an adverse effect on our business and profitability in future periods. We cannot currently predict
when or if FHFA will permit us to engage in new products under the interim final rule, nor when the rule will be
finalized.

Affordable Housing Goals
     We are subject to annual affordable housing goals. In light of these housing goals, we may make adjustments to our
mortgage loan sourcing and purchase strategies, which could further increase our credit losses. These strategies could
include entering into some purchase and securitization transactions with lower expected economic returns than our typical
transactions. We at times relax some of our underwriting criteria to obtain goal-qualifying mortgage loans and make
additional investments in higher risk mortgage loan products that we believe are more likely to serve the borrowers
targeted by the goals, but have not done so to the same extent since 2010.
     If the Director of FHFA finds that we failed to meet a housing goal and that achievement of the housing goal was
feasible, the GSE Act states that the Director may require the submission of a housing plan with respect to the housing
goal for approval by the Director. The housing plan must describe the actions we would take to achieve the unmet goal in
the future. FHFA has the authority to take actions against us, including issuing a cease and desist order or assessing civil
money penalties, if we: (a) fail to submit a required housing plan or fail to make a good faith effort to comply with a plan
approved by FHFA; or (b) fail to submit certain data relating to our mortgage purchases, information or reports as
required by law. See “RISK FACTORS — Legal and Regulatory Risks — We may make certain changes to our business
in an attempt to meet the housing goals and subgoals set for us by FHFA that may increase our losses.”
     Effective beginning calendar year 2010, the Reform Act requires that FHFA establish, by regulation, four single-
family housing goals, one multifamily special affordable housing goal and requirements relating to multifamily housing
for very low-income families. Our housing goals for 2010 and 2011, as established by FHFA, are described below. FHFA
has not yet established our housing goals for 2012.

Affordable Housing Goals for 2010 and 2011 and Results for 2010
      On September 14, 2010, FHFA published in the Federal Register a final rule establishing new affordable housing
goals for Freddie Mac and Fannie Mae for 2010 and 2011. The final rule was effective on October 14, 2010. The rule
establishes four goals and one subgoal for single-family owner-occupied housing, one multifamily special affordable
housing goal, and one multifamily special affordable housing subgoal. Three of the single-family housing goals and the
subgoal target purchase money mortgages for: (a) low-income families; (b) very low-income families; and/or (c) families
that reside in low-income areas. The single-family housing goals also include one that targets refinancing mortgages for
low-income families. The multifamily special affordable housing goal targets multifamily rental housing affordable to
low-income families. The multifamily special affordable housing subgoal targets multifamily rental housing affordable to
very low-income families.
     The single-family goals are expressed as a percentage of the total number of eligible mortgages underlying our total
single-family mortgage purchases. The multifamily goals are expressed in terms of minimum numbers of units financed.
     With respect to the single-family goals, the rule includes: (a) an assessment of performance as compared to the actual
share of the market that meets the criteria for each goal; and (b) a benchmark level to measure performance. Where our
performance on a single-family goal falls short of the benchmark for a goal, we still could achieve the goal if our
performance meets or exceeds the actual share of the market that meets the criteria for the goal for that year. For
example, if the actual market share of mortgages to low-income families relative to all mortgages originated to finance
                                                            34                                                 Freddie Mac
owner-occupied single-family properties is lower than the 27% benchmark rate, we would still satisfy this goal if we
achieve that actual market percentage.
     The rule makes a number of changes to the previous counting methods for goals credit, including prohibiting housing
goals credit for purchases of private-label securities. However, the rule allows credit under the low-income refinance goal
for permanent MHA Program loan modifications. The rule also states that FHFA does not intend for the enterprises to
undertake economically adverse or high-risk activities in support of the goals, nor does it intend for the enterprises’ state
of conservatorship to be a justification for withdrawing support from these important market segments.
       Our housing goals for 2010 and 2011 and results for 2010 are set forth in the table below.

Table 5 — Affordable Housing Goals for 2010 and 2011 and Results for 2010
                                                                                                                         Goals for 2010 and 2011   Market Level for 2010(1)   Results for 2010(2)

Single-family purchase money goals (benchmark levels):
  Low-income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .               27%                    27.2%                    26.8%
  Very low-income . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .                8%                     8.1%                     7.9%
  Low-income areas(3) . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .               24%                    24.0%                    23.0%
  Low-income areas subgoal . . . . . . . . . . . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .               13%                    12.1%                    10.4%
Single-family refinance low-income goal (benchmark level)                    .   .   .   .   .   .   .   .   .   .   .               21%                    20.2%                    22.0%
Multifamily low-income goal (in units) . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .          161,250                     N/A                   161,500
Multifamily low-income subgoal (in units) . . . . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .           21,000                     N/A                    29,656
(1) Determined by FHFA based on its analysis of market data for 2010.
(2) In February 2012, at the direction of FHFA, we revised our single-family results for 2010 to exclude mortgages underlying certain HFA bonds.
(3) FHFA will annually set the benchmark level for the low-income areas goal based on the benchmark level for the low-income areas subgoal, plus an
    adjustment factor reflecting the additional incremental share of mortgages for moderate-income families in designated disaster areas in the most
    recent year for which such data is available. For 2010 and 2011, FHFA set the benchmark level for the low-income areas goal at 24% for both
    periods.

     We previously reported that we did not achieve the benchmark levels for the single-family low-income areas goal and
the related low-income areas subgoal for 2010 and that we did achieve the benchmark levels for the single-family low-
income purchase and very low-income purchase goals. In February 2012, at the direction of FHFA, we revised our single-
family results for 2010 to exclude mortgages underlying certain HFA bonds. FHFA determined that the resulting small
shortfalls were not sufficient to require reopening its previous determination that the single-family low-income purchase
and very low-income purchase goals had been met. FHFA has informed us that, given that 2010 is the first year under
which FHFA utilized the benchmark or market level for the housing goals and that we continue to operate under
conservatorship, FHFA will not be requiring housing plans for goals that we did not achieve.
      We expect to report our performance with respect to the 2011 affordable housing goals in March 2012. At this time,
based on preliminary information, we believe we met the single-family refinance low-income goal and both multifamily
goals, and believe we failed to meet the FHFA benchmark level for the single-family purchase-money goals and the
subgoal for 2011. In such cases, FHFA regulations allow us to achieve a goal if our qualifying share matches that of the
market, as measured by the Home Mortgage Disclosure Act. Because the Home Mortgage Disclosure Act data for 2011
will not be released until September 2012, FHFA will not be able to make a final determination on our performance until
that time. If we fail to meet both the FHFA benchmark level and the market level, we may enter into discussions with
FHFA concerning whether these goals were infeasible under the terms of the GSE Act, due to market and economic
conditions and our financial condition. For more information, see “EXECUTIVE COMPENSATION — Compensation
Discussion and Analysis — Executive Management Compensation Program — Determination of the Performance-Based
Portion of 2011 Deferred Base Salary.”
      We anticipate that the difficult market conditions and our financial condition will continue to affect our affordable
housing activities in 2012. However, we view the purchase of mortgage loans that are eligible to count toward our
affordable housing goals to be a principal part of our mission and business and we are committed to facilitating the
financing of affordable housing for low- and moderate-income families. See also “RISK FACTORS — Legal and
Regulatory Risks — We may make certain changes to our business in an attempt to meet the housing goals and subgoals
set for us by FHFA that may increase our losses.”

Duty to Serve Underserved Markets
     The GSE Act establishes a duty for Freddie Mac and Fannie Mae to serve three underserved markets (manufactured
housing, affordable housing preservation and rural areas) by developing loan products and flexible underwriting guidelines
to facilitate a secondary market for mortgages for very low-, low- and moderate-income families in those markets.
Effective for 2010 and subsequent years, FHFA is required to establish a manner for annually: (a) evaluating whether and
                                                                                                         35                                                                    Freddie Mac
to what extent Freddie Mac and Fannie Mae have complied with the duty to serve underserved markets; and (b) rating the
extent of compliance.
      On June 7, 2010, FHFA published in the Federal Register a proposed rule regarding the duty of Freddie Mac and
Fannie Mae to serve the underserved markets. Comments were due on July 22, 2010. We provided comments on the
proposed rule to FHFA, but we cannot predict the contents of any final rule that FHFA may release, or the impact that the
final rule will have on our business or operations.

Affordable Housing Goals and Results for 2009
     Prior to 2010, we were subject to affordable housing goals related to mortgages for low- and moderate-income
families, low-income families living in low-income areas, very low-income families and families living in defined
underserved areas. These goals were set as a percentage of the total number of dwelling units underlying our total
mortgage purchases. The goal relating to low-income families living in low-income areas and very low-income families
was referred to as the “special affordable” housing goal. This special affordable housing goal also included a multifamily
annual minimum dollar volume target of qualifying multifamily mortgage purchases. In addition, from 2005 to 2009, we
were subject to three subgoals that were expressed as percentages of the total number of mortgages we purchased that
financed the purchase of single-family, owner-occupied properties located in metropolitan areas.
      Our housing goals and results for 2009 are set forth in the table below.

Table 6 — Affordable Housing Goals and Results for 2009(1)
                                                                                                                                                                                                                                                       Goal    Results

Housing goals and actual results
  Low- and moderate-income goal . . . . . . . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    43% 44.7%
  Underserved areas goal(2) . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    32   26.8
  Special affordable goal(3) . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    18   17.8
    Multifamily special affordable volume target (in billions)(2) .              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $4.60  $3.69
Home purchase subgoals and actual results:
  Low- and moderate-income subgoal . . . . . . . . . . . . . . . . . .           ..........................................                                                                                                                              40%    48.4%
  Underserved areas subgoal(3) . . . . . . . . . . . . . . . . . . . . . . .     ..........................................                                                                                                                              30     27.9
  Special affordable subgoal . . . . . . . . . . . . . . . . . . . . . . . . .   ..........................................                                                                                                                              14     20.6
(1) An individual mortgage may qualify for more than one of the goals or subgoals. Each of the goal and subgoal percentages and each of our
    percentage results is determined independently and cannot be aggregated to determine a percentage of total purchases that qualifies for these goals
    or subgoals.
(2) These goals were determined to be infeasible.
(3) FHFA concluded that achievement by us of these goals and subgoals was feasible, but decided not to require us to submit a housing plan.

Affordable Housing Allocations
     The GSE Act requires us to set aside in each fiscal year an amount equal to 4.2 basis points for each dollar of the
UPB of total new business purchases, and allocate or transfer such amount to: (a) HUD to fund a Housing Trust Fund
established and managed by HUD; and (b) a Capital Magnet Fund established and managed by Treasury. FHFA has the
authority to suspend our allocation upon finding that the payment would contribute to our financial instability, cause us to
be classified as undercapitalized or prevent us from successfully completing a capital restoration plan. In November 2008,
FHFA advised us that it has suspended the requirement to set aside or allocate funds for the Housing Trust Fund and the
Capital Magnet Fund until further notice.

Prudential Management and Operations Standards
     The GSE Act requires FHFA to establish prudential standards, by regulation or by guideline, for a broad range of
operations of the enterprises. These standards must address internal controls, information systems, independence and
adequacy of internal audit systems, management of interest rate risk exposure, management of market risk, liquidity and
reserves, management of asset and investment portfolio growth, overall risk management processes, investments and asset
acquisitions, management of credit and counterparty risk, and recordkeeping. FHFA may also establish any additional
operational and management standards the Director of FHFA determines appropriate.
     On June 20, 2011, FHFA published a proposed rule that would establish prudential standards, in the form of
guidelines, relating to the management and operations of Freddie Mac, Fannie Mae, and the FHLBs. This proposed rule
implements certain Reform Act amendments to the GSE Act. The proposed standards address a number of business,
controls, and risk management areas. The standards specify the possible consequences for any entity that fails to meet any
of the standards or otherwise fails to comply (including submission of a corrective plan, limits on asset growth, increases
in capital, limits on dividends and stock redemptions or repurchases, a minimum level of retained earnings or any other
action that the FHFA Director determines will contribute to bringing the entity into compliance with the standards). In
                                                                                             36                                                                                                                                                        Freddie Mac
addition, a failure to meet any standard also may constitute an unsafe or unsound practice, which may form the basis for
FHFA initiating an administrative enforcement action. Because FHFA proposes to adopt the standards as guidelines, as
authorized by the Reform Act, FHFA may modify, revoke or add to the standards at any time by order.

Portfolio Activities
     The GSE Act requires FHFA to establish, by regulation, criteria governing portfolio holdings to ensure the holdings
are backed by sufficient capital and consistent with the enterprises’ mission and safe and sound operations. In establishing
these criteria, FHFA must consider the ability of the enterprises to provide a liquid secondary market through
securitization activities, the portfolio holdings in relation to the mortgage market and the enterprises’ compliance with the
prudential management and operations standards prescribed by FHFA.
    On December 28, 2010, FHFA issued a final rule adopting the portfolio holdings criteria established in the Purchase
Agreement, as it may be amended from time to time, for so long as we remain subject to the Purchase Agreement.
     See “Conservatorship and Related Matters — Impact of Conservatorship and Related Activities on Our Business” for
additional information on restrictions to our portfolio activities.

Anti-Predatory Lending
     Predatory lending practices are in direct opposition to our mission, our goals and our practices. We have instituted
anti-predatory lending policies intended to prevent the purchase or assignment of mortgage loans with unacceptable terms
or conditions or resulting from unacceptable practices. These policies include processes related to the delivery and
validation of loans sold to us. In addition to the purchase policies we have instituted, we promote consumer education and
financial literacy efforts to help borrowers avoid abusive lending practices and we provide competitive mortgage products
to reputable mortgage originators so that borrowers have a greater choice of financing options.

Subordinated Debt
     FHFA directed us to continue to make interest and principal payments on our subordinated debt, even if we fail to
maintain required capital levels. As a result, the terms of any of our subordinated debt that provide for us to defer
payments of interest under certain circumstances, including our failure to maintain specified capital levels, are no longer
applicable. In addition, the requirements in the agreement we entered into with FHFA in September 2005 with respect to
issuance, maintenance, and reporting and disclosure of Freddie Mac subordinated debt have been suspended during the
term of conservatorship and thereafter until directed otherwise. See “NOTE 15: REGULATORY CAPITAL —
Subordinated Debt Commitment” for more information regarding subordinated debt.

Department of Housing and Urban Development
     HUD has regulatory authority over Freddie Mac with respect to fair lending. Our mortgage purchase activities are
subject to federal anti-discrimination laws. In addition, the GSE Act prohibits discriminatory practices in our mortgage
purchase activities, requires us to submit data to HUD to assist in its fair lending investigations of primary market lenders
with which we do business and requires us to undertake remedial actions against such lenders found to have engaged in
discriminatory lending practices. In addition, HUD periodically reviews and comments on our underwriting and appraisal
guidelines for consistency with the Fair Housing Act and the anti-discrimination provisions of the GSE Act.

Department of the Treasury
      Treasury has significant rights and powers with respect to our company as a result of the Purchase Agreement. In
addition, under our charter, the Secretary of the Treasury has approval authority over our issuances of notes, debentures
and substantially identical types of unsecured debt obligations (including the interest rates and maturities of these
securities), as well as new types of mortgage-related securities issued subsequent to the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989. The Secretary of the Treasury has performed this debt
securities approval function by coordinating GSE debt offerings with Treasury funding activities. In addition, our charter
authorizes Treasury to purchase Freddie Mac debt obligations not exceeding $2.25 billion in aggregate principal amount at
any time.
     The Reform Act granted the Secretary of the Treasury authority to purchase any obligations and securities issued by
us and Fannie Mae until December 31, 2009 on such terms and conditions and in such amounts as the Secretary may
determine, provided that the Secretary determined the purchases were necessary to provide stability to the financial
markets, prevent disruptions in the availability of mortgage finance, and protect taxpayers. See “Conservatorship and
Related Matters — Treasury Agreements.”
                                                             37                                                 Freddie Mac
Securities and Exchange Commission
     We are subject to the financial reporting requirements applicable to registrants under the Exchange Act, including the
requirement to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K. Although our common stock is required to be registered under the Exchange Act, we continue to be exempt
from certain federal securities law requirements, including the following:
    • Securities we issue or guarantee are “exempted securities” under the Securities Act and may be sold without
      registration under the Securities Act;
    • We are excluded from the definitions of “government securities broker” and “government securities dealer” under
      the Exchange Act;
    • The Trust Indenture Act of 1939 does not apply to securities issued by us; and
    • We are exempt from the Investment Company Act of 1940 and the Investment Advisers Act of 1940, as we are an
      “agency, authority or instrumentality” of the U.S. for purposes of such Acts.

Legislative and Regulatory Developments
    We discuss certain significant legislative and regulatory developments below. For more information regarding these
and other legislative and regulatory developments that could impact our business, see “RISK FACTORS —
Conservatorship and Related Matters” and “— Legal and Regulatory Risks.”

Administration Report on Reforming the U.S. Housing Finance Market
     On February 11, 2011, the Administration delivered a report to Congress that lays out the Administration’s plan to
reform the U.S. housing finance market, including options for structuring the government’s long-term role in a housing
finance system in which the private sector is the dominant provider of mortgage credit. The report recommends winding
down Freddie Mac and Fannie Mae, stating that the Administration will work with FHFA to determine the best way to
responsibly reduce the role of Freddie Mac and Fannie Mae in the market and ultimately wind down both institutions. The
report states that these efforts must be undertaken at a deliberate pace, which takes into account the impact that these
changes will have on borrowers and the housing market.
     The report states that the government is committed to ensuring that Freddie Mac and Fannie Mae have sufficient
capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations,
and further states that the Administration will not pursue policies or reforms in a way that would impair the ability of
Freddie Mac and Fannie Mae to honor their obligations. The report states the Administration’s belief that under the
companies’ senior preferred stock purchase agreements with Treasury, there is sufficient funding to ensure the orderly and
deliberate wind down of Freddie Mac and Fannie Mae, as described in the Administration’s plan.
     The report identifies a number of policy levers that could be used to wind down Freddie Mac and Fannie Mae, shrink
the government’s footprint in housing finance, and help bring private capital back to the mortgage market, including
increasing guarantee fees, phasing in a 10% down payment requirement, reducing conforming loan limits, and winding
down Freddie Mac and Fannie Mae’s investment portfolios, consistent with the senior preferred stock purchase
agreements. These recommendations, if implemented, would have a material impact on our business volumes, market
share, results of operations and financial condition.
     As discussed below in “Legislated Increase to Guarantee Fees,” we have recently been directed by FHFA to raise our
guarantee fees. We cannot currently predict the extent to which our business will be impacted by this increase in
guarantee fees. In addition, as discussed below in “Conforming Loan Limits,” the temporary high-cost area loan limits
expired on September 30, 2011.
     We cannot predict the extent to which the other recommendations in the report will be implemented or when any
actions to implement them may be taken. However, we are not aware of any current plans of our Conservator to
significantly change our business model or capital structure in the near-term.

FHFA’s Strategic Plan for Freddie Mac and Fannie Mae Conservatorships
     On February 21, 2012, FHFA sent to Congress a strategic plan for the next phase of the conservatorships of Freddie
Mac and Fannie Mae. The plan sets forth objectives and steps FHFA is taking or will take to meet FHFA’s obligations as
Conservator. FHFA states that the steps envisioned in the plan are consistent with each of the housing finance reform
frameworks set forth in the report delivered by the Administration to Congress in February 2011, as well as with the
leading congressional proposals introduced to date. FHFA indicates that the plan leaves open all options for Congress and
                                                            38                                                Freddie Mac
the Administration regarding the resolution of the conservatorships and the degree of government involvement in
supporting the secondary mortgage market in the future.
    FHFA’s plan provides lawmakers and the public with an outline of how FHFA as Conservator intends to guide
Freddie Mac and Fannie Mae over the next few years, and identifies three strategic goals:
    • Build. Build a new infrastructure for the secondary mortgage market;
    • Contract. Gradually contract Freddie Mac and Fannie Mae’s dominant presence in the marketplace while
      simplifying and shrinking their operations; and
    • Maintain. Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages.
     The first of these goals establishes the steps FHFA, Freddie Mac, and Fannie Mae will take to create the necessary
infrastructure, including a securitization platform and national standards for mortgage securitization, that Congress and
market participants may use to develop the secondary mortgage market of the future. As part of this process, FHFA would
determine how Freddie Mac and Fannie Mae can work together to build a single securitization platform that would
replace their current separate proprietary systems.
     The second goal describes steps that FHFA plans to take to gradually shift mortgage credit risk from Freddie Mac
and Fannie Mae to private investors and eliminate the direct funding of mortgages by the enterprises. The plan states that
the goal of gradually shifting mortgage credit risk from Freddie Mac and Fannie Mae to private investors could be
accomplished, in the case of single-family credit guarantees, in several ways, including increasing guarantee fees,
establishing loss-sharing arrangements and expanding reliance on mortgage insurance. To evaluate how to accomplish the
goal of contracting enterprise operations in the multifamily business, the plan states that Freddie Mac and Fannie Mae will
each undertake a market analysis of the viability of its respective multifamily operations without government guarantees.
     For the third goal, the plan states that programs and strategies to ensure ongoing mortgage credit availability, assist
troubled homeowners, and minimize taxpayer losses while restoring stability to housing markets continue to require
energy, focus, and resources. The plan states that activities that must be continued and enhanced include: (a) successful
implementation of HARP, including the significant program changes announced in October 2011; (b) continued
implementation of the Servicing Alignment Initiative; (c) renewed focus on short sales, deeds-in-lieu, and deeds-for-lease
options that enable households and Freddie Mac and Fannie Mae to avoid foreclosure; and (d) further development and
implementation of the REO disposition initiative announced by FHFA in 2011.

Legislated Increase to Guarantee Fees
     On December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011.
Among its provisions, this new law directs FHFA to require Freddie Mac and Fannie Mae to increase guarantee fees by
no less than 10 basis points above the average guarantee fees charged in 2011 on single-family mortgage-backed
securities. Under the law, the proceeds from this increase will be remitted to Treasury to fund the payroll tax cut, rather
than retained by the companies.
     FHFA has announced that, effective April 1, 2012, the guarantee fee on all single-family residential mortgages sold
to Freddie Mac and Fannie Mae will increase by 10 basis points. In early 2012, FHFA will further analyze whether
additional guarantee fee increases are necessary to ensure the new requirements are being met. If so, FHFA will announce
plans for further guarantee fee increases or other fee adjustments that may then be implemented gradually over a two-year
implementation window, taking into consideration risk levels and conditions in financial markets. FHFA will monitor
closely the increased guarantee fees imposed as a result of the new law throughout its effective period.
     Our business and financial condition will not benefit from the increases in guarantee fees under this law, as we must
remit the proceeds from such increases to Treasury. It is currently unclear what effect this increase or any further
guarantee fee increases or other fee adjustments associated with this law will have on the future profitability and
operations of our single-family guarantee business, or on our ability to raise guarantee fees that may be retained by us.
While we continue to assess the impact of this law, we currently believe that implementation of this law will present
operational and accounting challenges for us.

Legislation Related to Reforming Freddie Mac and Fannie Mae
     Our future structure and role will be determined by the Administration and Congress, and there are likely to be
significant changes beyond the near-term. Congress continues to hold hearings and consider legislation on the future state
of Freddie Mac and Fannie Mae. On February 2, 2012, the Administration announced that it expects to provide more
                                                             39                                                 Freddie Mac
detail concerning approaches to reform the U.S. housing finance market in the spring, and that it plans to begin exploring
options for legislation more intensively with Congress.
      Several bills were introduced in Congress in 2011 that would comprehensively reform the secondary mortgage
market and address the future state of Freddie Mac and Fannie Mae. None of the bills have been scheduled for further
consideration in the Senate. In the House, several of these bills were approved by the House Financial Services
Subcommittee on Capital Markets and Government-Sponsored Enterprises. Most recently, this subcommittee approved a
bill in December 2011 that would reform the secondary mortgage market by facilitating continued standardization and
uniformity in mortgage securitization. Under several of the bills, our charter would be revoked and we would be wound
down or placed into receivership. Such legislation could impair our ability to issue securities in the capital markets and
therefore our ability to conduct our business, absent an explicit guarantee of our existing and ongoing liabilities by the
U.S. government.
     The House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises approved a
number of other bills in 2011 that would limit the companies’ operations or alter FHFA or Treasury’s authority over the
companies, including bills that would require advance approval by the Secretary of the Treasury and notice to Congress
for all debt issuances by the companies; require FHFA to direct the companies to increase guarantee fees; repeal our
affordable housing goals; prohibit the companies from initially offering new products during conservatorship or
receivership; accelerate reductions in our mortgage-related investments portfolio; require that Freddie Mac and Fannie
Mae mortgages be treated the same as other mortgages for purposes of risk retention requirements in the Dodd-Frank Act;
grant the FHFA Inspector General direct access to our records and employees; authorize FHFA, as receiver, to revoke the
charters of Freddie Mac and Fannie Mae; prevent Treasury from lowering the dividend payment under the Purchase
Agreement; abolish the Affordable Housing Trust Fund, the Capital Magnet Fund, and the HOPE Reserve Fund; require
disposition of non-mission critical assets; apply the Freedom of Information Act to Freddie Mac and Fannie Mae; and set
a cap on the funds received under the Purchase Agreement.

      In 2011, the Financial Services Committee of the House of Representatives approved a bill that would generally put
our employees on the federal government pay scale, and in 2012 both the House and the Senate approved legislation that
would prohibit senior executives from receiving bonuses during conservatorship. In February 2012, legislative proposals
were introduced in the Senate that would, among other items, cap the compensation and benefits of executive officers and
employees of Freddie Mac and Fannie Mae so they cannot exceed the amounts paid to the highest compensated executive
or employee at the federal financial institution regulatory agencies; and require executive officers, under certain
circumstances, to return to Treasury any compensation earned that exceeds the regulatory agencies’ rate of compensation.
If this or similar legislation were to become law, many of our employees would experience a sudden and sharp decrease
in compensation. The Acting Director of FHFA stated on November 15, 2011 that this “would certainly risk a substantial
exodus of talent, the best leaving first in many instances. [Freddie Mac and Fannie Mae] likely would suffer a rapidly
growing vacancy list and replacements with lesser skills and no experience in their specific jobs. A significant increase in
safety and soundness risks and in costly operational failures would, in my opinion, be highly likely.” The Acting Director
noted that “[s]hould the risks I fear materialize, FHFA might well be forced to limit [Freddie Mac and Fannie Mae’s]
business activities. Some of the business [Freddie Mac and Fannie Mae] would be unable to undertake might simply not
occur, with potential disruption in housing markets and the economy.”

     Some of the bills discussed above, if enacted, would materially affect the role of the company, our business model
and our structure, and could have an adverse effect on our financial results and operations as well as our ability to retain
and recruit management and other valuable employees. A number of the bills would adversely affect our ability to
conduct business under our current business model, including by subjecting us to new requirements that could increase
costs, reduce revenues and limit or prohibit current business activities.

      We cannot predict whether or when any of the bills discussed above might be enacted. We also expect additional
bills relating to Freddie Mac and Fannie Mae to be introduced and considered by Congress in 2012.

     For more information on the potential impacts of legislative developments on compensation and employee retention,
see “RISK FACTORS — Conservatorship and Related Matters — The conservatorship and uncertainty concerning our
future has had, and will likely continue to have, an adverse effect on the retention, recruitment and engagement of
management and other employees, which could have a material adverse effect on our ability to operate our business” and
“MD&A — RISK MANAGEMENT — Operational Risks.”
                                                             40                                                  Freddie Mac
Dodd-Frank Act
     The Dodd-Frank Act, which was signed into law on July 21, 2010, significantly changed the regulation of the
financial services industry, including by creating new standards related to regulatory oversight of systemically important
financial companies, derivatives, capital requirements, asset-backed securitization, mortgage underwriting, and consumer
financial protection. The Dodd-Frank Act has directly affected and will continue to directly affect the business and
operations of Freddie Mac by subjecting us to new and additional regulatory oversight and standards, including with
respect to our activities and products. We may also be affected by provisions of the Dodd-Frank Act and implementing
regulations that affect the activities of banks, savings institutions, insurance companies, securities dealers, and other
regulated entities that are our customers and counterparties.
       Implementation of the Dodd-Frank Act is being accomplished through numerous rulemakings, many of which are
still in process. Accordingly, it is difficult to assess fully the impact of the Dodd-Frank Act on Freddie Mac and the
financial services industry at this time. The final effects of the legislation will not be known with certainty until these
rulemakings are complete. The Dodd-Frank Act also mandates the preparation of studies on a wide range of issues, which
could lead to additional legislation or regulatory changes.
     Recent developments with respect to Dodd-Frank rulemakings that may have a significant impact on Freddie Mac
include the following:
     • Designation as a systemically important nonbank financial company — The Financial Stability Oversight Council,
       or FSOC, is expected to announce during 2012 which nonbank financial companies are systemically important. The
       Federal Reserve has recently proposed rules to implement the enhanced supervisory and prudential requirements
       that would apply to designated nonbank financial companies. The proposal includes rules to implement Dodd-
       Frank requirements related to risk-based capital and leverage, liquidity, single-counterparty credit limits, overall
       risk management and risk committees, stress tests, and debt-to-equity limits for certain covered companies. The
       proposed rules also would implement Dodd-Frank requirements related to early remediation of financial distress of
       a designated nonbank financial company. In addition, a recently adopted final rule requires designated nonbank
       financial companies to submit annual resolution plans that describe the company’s strategy for rapid and orderly
       resolution in bankruptcy during times of financial distress. If Freddie Mac is designated as a systemically important
       nonbank financial company, we could be subject to these and other additional oversight and prudential standards.
     • Derivatives Rulemakings — The U.S. Commodity Futures Trading Commission, or CFTC, has promulgated a
       number of final rules implementing the Dodd-Frank Act’s provisions relating to derivatives. However, the CFTC
       has yet to finalize many of the more significant derivative-related rules, including rules addressing the definition of
       “major swap participant” and margin requirements for uncleared swaps. The Dodd-Frank Act imposes certain new
       requirements on all swaps counterparties, including requirements addressing recordkeeping and reporting. If
       Freddie Mac qualifies as a major swap participant, it will be subject to increased and additional requirements, such
       as those relating to registration and business conduct. The eventual final rules on margin might increase the costs
       of our swaps transactions. According to the CFTC’s tentative schedule, the CFTC expects to finalize the major
       swap participant definition rule in the first quarter of 2012, but it does not expect to consider final rules on margin
       (and numerous other topics) until later in 2012.
     We continue to review and assess the impact of rulemakings and other activities under the Dodd-Frank Act. For more
information, see “RISK FACTORS — Legal and Regulatory Risks — The Dodd-Frank Act and related regulation may
adversely affect our business activities and financial results.”

Conforming Loan Limits
     Beginning in 2008, pursuant to a series of laws, our loan limits in certain high-cost areas were increased temporarily
above the limits that otherwise would be applicable (up to $729,750 for a one-family residence). On September 30, 2011,
the latest of these increases was permitted to expire. Accordingly, our permanent high-cost area loan limits apply with
respect to loans originated on or after October 1, 2011 in high-cost areas (currently, up to $625,500 for a one-family
residence). A new law reinstated higher conforming loan limits for FHA-insured mortgages through 2013. However, these
reinstated higher limits do not apply to Freddie Mac and Fannie Mae.

Developments Concerning Single-Family Servicing Practices
     There have been a number of regulatory developments in recent periods impacting single-family mortgage servicing
and foreclosure practices, including those discussed below. It is possible that these developments will result in significant
changes to mortgage servicing and foreclosure practices that could adversely affect our business. New compliance
                                                              41                                                 Freddie Mac
requirements placed on servicers as a result of these developments could expose Freddie Mac to financial risk as a result
of further extensions of foreclosure timelines if home prices remain weak or decline. We may need to make additional
significant changes to our practices, which could increase our operational risk. It is difficult to predict other impacts on
our business of these changes, though such changes could adversely affect our credit losses and costs of servicing, and
make it more difficult for us to transfer mortgage servicing rights to a successor servicer should we need to do so. The
regulatory developments and changes include the following:
     • On April 13, 2011, the OCC, the Federal Reserve, the FDIC, and the Office of Thrift Supervision entered into
       consent orders with 14 large servicers regarding their foreclosure and loss mitigation practices. These institutions
       service the majority of the single-family mortgages we own or guarantee. The consent orders required the servicers
       to submit comprehensive action plans relating to, among other items, use of foreclosure documentation, staffing of
       foreclosure and loss mitigation activities, oversight of third parties, use of the Mortgage Electronic Registration
       System, or the MERS System, and communications with borrowers. We will not be able to assess the impact of
       these actions on our business until the servicers’ comprehensive action plans are publicly available.
     • On April 28, 2011, FHFA announced a new set of aligned standards for servicing delinquent mortgages owned or
       guaranteed by Freddie Mac and Fannie Mae. We implemented most aspects of this initiative effective October 1,
       2011. We have also implemented a new standard modification initiative that replaced our previous non-HAMP
       modification program beginning January 1, 2012. See “MD&A — RISK MANAGEMENT — Credit Risk —
       Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan Workouts and the MHA
       Program.” FHFA has also directed us and Fannie Mae to work on a joint initiative to consider alternatives for
       future mortgage servicing structures and servicing compensation. The development of further alternatives could
       impact our ability to conduct current initiatives. For more information, see “RISK FACTORS — Legal and
       Regulatory Risks — Legislative or regulatory actions could adversely affect our business activities and financial
       results.”
     • On June 30, 2011, the OCC issued Supervisory Guidance regarding the OCC’s expectations for the oversight and
       management of mortgage foreclosure activities by national banks. The Supervisory Guidance contains several
       elements from the consent orders with the 14 major servicers that will now be applied to all national banks. In the
       Supervisory Guidance, the OCC directed all national banks to conduct a self-assessment of foreclosure
       management practices by September 30, 2011. Additionally, the Guidance sets forth foreclosure management
       standards that mirror the broad categories of the servicing guidelines contained in the consent orders.
     • On October 19, 2011, FHFA announced that it has directed Freddie Mac and Fannie Mae to transition away from
       current foreclosure attorney network programs and move to a system where mortgage servicers select qualified law
       firms that meet certain minimum, uniform criteria. The changes will be implemented after a transition period in
       which input will be taken from servicers, regulators, lawyers, and other market participants. We cannot predict the
       scope or timing of these changes, or the extent to which our business will be impacted by them.
     • Several localities have adopted ordinances that would expand the responsibilities and liability for registering and
       maintaining vacant properties to servicers and assignees. These laws could significantly expand mortgage costs and
       liabilities in those areas. On December 8, 2011, FHFA directed Freddie Mac and Fannie Mae to take certain
       actions with respect to a municipal ordinance of the City of Chicago, and, on December 12, 2011, FHFA, on its
       own behalf and as conservator for Freddie Mac and Fannie Mae, filed a lawsuit against the City of Chicago to
       prevent enforcement of the ordinance.
     • On February 9, 2012, a coalition of state attorneys general and federal agencies announced that it had entered into
       a settlement with five large seller/servicers concerning certain issues related to mortgage servicing practices. While
       the settlement includes changes to mortgage servicing practices, it is too early to determine if these changes will
       have a significant effect on us. The settlement does not involve loans owned or guaranteed by us.
   For more information on operational risks related to these developments in mortgage servicing, see “MD&A — RISK
MANAGEMENT — Operational Risks.”

Administration Plan to Help Responsible Homeowners and Heal the Housing Market
     In his January 24, 2012 State of the Union Address, President Obama called for action to help responsible borrowers
and support a housing market recovery. The Administration subsequently put forth a “Plan to Help Responsible
Homeowners and Heal the Housing Market.” We have implemented, or are in the process of implementing, several aspects
of the Administration’s plan, such as the changes to HAMP discussed in “MD&A — RISK MANAGEMENT — Credit
                                                             42                                                  Freddie Mac
Risk — Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program — Home Affordable Modification
Program.” A number of other aspects of the plan could affect Freddie Mac, including those discussed below.
     The plan calls for Congress to pass legislation to establish a broad based mortgage refinancing plan. The broad based
refinancing plan includes provisions to further streamline the refinancing process for borrowers with loans guaranteed by
Freddie Mac and Fannie Mae. It would also provide underwater borrowers who participate in HARP with the choice of
taking the benefit of the reduced interest rate in the form of lower monthly payments, or applying that savings to
rebuilding equity in their homes. The plan would require us to change certain existing processes and could increase our
costs. To date, no legislation has been introduced in Congress with respect to this plan.
     The plan states that the mortgage servicing system would benefit from a single set of strong federal standards, and
indicates that the Administration will work closely with regulators, Congress and stakeholders to create a more robust and
comprehensive set of rules related to mortgage servicing. These rules would include standards for assisting at-risk
homeowners.

Employees
   At February 27, 2012, we had 4,859 full-time and 62 part-time employees. Our principal offices are located in
McLean, Virginia.

Available Information
SEC Reports
     We file reports and other information with the SEC. In view of the Conservator’s succession to all of the voting
power of our stockholders, we have not prepared or provided proxy statements for the solicitation of proxies from
stockholders since we entered into conservatorship, and do not expect to do so while we remain in conservatorship. We
make available free of charge through our website at www.freddiemac.com our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and all other SEC reports and amendments to those reports as soon
as reasonably practicable after we electronically file the material with, or furnish it to, the SEC. In addition, materials that
we filed with the SEC are available for review and copying at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an internet site (www.sec.gov) that contains reports, proxy and
information statements, and other information regarding companies that file electronically with the SEC.
     We are providing our website addresses and the website address of the SEC here or elsewhere in this annual report
on Form 10-K solely for your information. Information appearing on our website or on the SEC’s website is not
incorporated into this annual report on Form 10-K.

Information about Certain Securities Issuances by Freddie Mac
     Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a
material direct financial obligation or become directly or contingently liable for a material obligation under an off-balance
sheet arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is
incurred in connection with certain types of securities offerings, in prospectuses for that offering that are filed with the
SEC.
     Freddie Mac’s securities offerings are exempted from SEC registration requirements. As a result, we are not required
to and do not file registration statements or prospectuses with the SEC with respect to our securities offerings. To comply
with the disclosure requirements of Form 8-K relating to the incurrence of material financial obligations, we report our
incurrence of these types of obligations either in offering circulars (or supplements thereto) that we post on our website or
in a current report on Form 8-K, in accordance with a “no-action” letter we received from the SEC staff. In cases where
the information is disclosed in an offering circular posted on our website, the document will be posted on our website
within the same time period that a prospectus for a non-exempt securities offering would be required to be filed with the
SEC.
     The website address for disclosure about our debt securities is www.freddiemac.com/debt. From this address,
investors can access the offering circular and related supplements for debt securities offerings under Freddie Mac’s global
debt facility, including pricing supplements for individual issuances of debt securities.
    Disclosure about the mortgage-related securities we issue, some of which are off-balance sheet obligations, can be
found at www.freddiemac.com/mbs. From this address, investors can access information and documents about our
mortgage-related securities, including offering circulars and related offering circular supplements.
                                                              43                                                   Freddie Mac
Forward-Looking Statements
     We regularly communicate information concerning our business activities to investors, the news media, securities
analysts, and others as part of our normal operations. Some of these communications, including this Form 10-K, contain
“forward-looking statements,” including statements pertaining to the conservatorship, our current expectations and
objectives for our efforts under the MHA Program, the servicing alignment initiative and other programs to assist the
U.S. residential mortgage market, future business plans, liquidity, capital management, economic and market conditions
and trends, market share, the effect of legislative and regulatory developments, implementation of new accounting
guidance, credit losses, internal control remediation efforts, and results of operations and financial condition on a GAAP,
Segment Earnings, and fair value basis. Forward-looking statements involve known and unknown risks and uncertainties,
some of which are beyond our control. Forward-looking statements are often accompanied by, and identified with, terms
such as “objective,” “expect,” “trend,” “forecast,” “anticipate,” “believe,” “intend,” “could,” “future,” “may,” “will,” and
similar phrases. These statements are not historical facts, but rather represent our expectations based on current
information, plans, judgments, assumptions, estimates, and projections. Actual results may differ significantly from those
described in or implied by such forward-looking statements due to various factors and uncertainties, including those
described in the “RISK FACTORS” section of this Form 10-K and:
     • the actions FHFA, Treasury, the Federal Reserve, the SEC, HUD, the Administration, Congress, and our
       management may take;
     • the impact of the restrictions and other terms of the conservatorship, the Purchase Agreement, the senior preferred
       stock, and the warrant on our business, including our ability to pay: (a) the dividend on the senior preferred stock;
       and (b) any quarterly commitment fee that we are required to pay to Treasury under the Purchase Agreement;
     • our ability to maintain adequate liquidity to fund our operations, including following any changes in the support
       provided to us by Treasury or FHFA, a change in the credit ratings of our debt securities or a change in the credit
       rating of the U.S. government;
     • changes in our charter or applicable legislative or regulatory requirements, including any restructuring or
       reorganization in the form of our company, whether we will remain a stockholder-owned company or continue to
       exist and whether we will be wound down or placed under receivership, regulations under the GSE Act, the
       Reform Act, or the Dodd-Frank Act, regulatory or legislative actions taken to implement the Administration’s plan
       to reform the housing finance system, regulatory or legislative actions that require us to support non-mortgage
       market initiatives, changes to affordable housing goals regulation, reinstatement of regulatory capital requirements,
       or the exercise or assertion of additional regulatory or administrative authority;
     • changes in the regulation of the mortgage and financial services industries, including changes caused by the Dodd-
       Frank Act, or any other legislative, regulatory, or judicial action at the federal or state level;
     • enforcement actions against mortgage servicers and other mortgage industry participants by federal or state
       authorities;
     • the scope of various initiatives designed to help in the housing recovery (including the extent to which borrowers
       participate in the recently expanded HARP program, the MHA Program and new non-HAMP standard loan
       modification initiative), and the impact of such programs on our credit losses, expenses, and the size and
       composition of our mortgage-related investments portfolio;
     • the impact of any deficiencies in foreclosure documentation practices and related delays in the foreclosure process;
     • the ability of our financial, accounting, data processing, and other operating systems or infrastructure, and those of
       our vendors to process the complexity and volume of our transactions;
     • changes in accounting or tax guidance or in our accounting policies or estimates, and our ability to effectively
       implement any such changes in guidance, policies, or estimates;
     • changes in general regional, national, or international economic, business, or market conditions and competitive
       pressures, including changes in employment rates and interest rates, and changes in the federal government’s fiscal
       and monetary policy;
     • changes in the U.S. residential mortgage market, including changes in the rate of growth in total outstanding
       U.S. residential mortgage debt, the size of the U.S. residential mortgage market, and home prices;
     • our ability to effectively implement our business strategies, including our efforts to improve the supply and
       liquidity of, and demand for, our products, and restrictions on our ability to offer new products or engage in new
       activities;
                                                             44                                                  Freddie Mac
    • our ability to recruit, retain, and engage executive officers and other key employees;
    • our ability to effectively identify and manage credit, interest-rate, operational, and other risks in our business,
      including changes to the credit environment and the levels and volatilities of interest rates, as well as the shape and
      slope of the yield curves;
    • the effects of internal control deficiencies and our ability to effectively identify, assess, evaluate, manage, mitigate,
      or remediate control deficiencies and risks, including material weaknesses and significant deficiencies, in our
      internal control over financial reporting and disclosure controls and procedures;
    • incomplete or inaccurate information provided by customers and counterparties;
    • consolidation among, or adverse changes in the financial condition of, our customers and counterparties;
    • the failure of our customers and counterparties to fulfill their obligations to us, including the failure of seller/
      servicers to meet their obligations to repurchase loans sold to us in breach of their representations and warranties,
      and the potential cost and difficulty of legally enforcing those obligations;
    • changes in our judgments, assumptions, forecasts, or estimates regarding the volume of our business and spreads
      we expect to earn;
    • the availability of options, interest-rate and currency swaps, and other derivative financial instruments of the types
      and quantities, on acceptable terms, and with acceptable counterparties needed for investment funding and risk
      management purposes;
    • changes in pricing, valuation or other methodologies, models, assumptions, judgments, estimates and/or other
      measurement techniques, or their respective reliability;
    • changes in mortgage-to-debt OAS;
    • the potential impact on the market for our securities resulting from any purchases or sales by the Federal Reserve
      or Treasury of Freddie Mac debt or mortgage-related securities;
    • adverse judgments or settlements in connection with legal proceedings, governmental investigations, and IRS
      examinations;
    • volatility of reported results due to changes in the fair value of certain instruments or assets;
    • the development of different types of mortgage servicing structures and servicing compensation;
    • preferences of originators in selling into the secondary mortgage market;
    • changes to our underwriting or servicing requirements (including servicing alignment efforts under the servicing
      alignment initiative), our practices with respect to the disposition of REO properties, or investment standards for
      mortgage-related products;
    • investor preferences for mortgage loans and mortgage-related and debt securities compared to other investments;
    • borrower preferences for fixed-rate mortgages versus ARMs;
    • the occurrence of a major natural or other disaster in geographic areas in which our offices or portions of our total
      mortgage portfolio are concentrated;
    • other factors and assumptions described in this Form 10-K, including in the “MD&A” section;
    • our assumptions and estimates regarding the foregoing and our ability to anticipate the foregoing factors and their
      impacts; and
    • market reactions to the foregoing.
    Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any
forward-looking statements we make to reflect events or circumstances occurring after the date of this Form 10-K.

                                               ITEM 1A. RISK FACTORS
     Investing in our securities involves risks, including the risks described below and in “BUSINESS,” “MD&A,” and
elsewhere in this Form 10-K. These risks and uncertainties could, directly or indirectly, adversely affect our business,
financial condition, results of operations, cash flows, strategies and/or prospects.
                                                              45                                                  Freddie Mac
Conservatorship and Related Matters
The future status and role of Freddie Mac is uncertain and could be materially adversely affected by legislative and
regulatory action that alters the ownership, structure, and mission of the company.
     The Acting Director of FHFA stated on November 15, 2011 that “the long-term outlook is that neither [Freddie Mac
nor Fannie Mae] will continue to exist, at least in its current form, in the future.” Future legislation will likely materially
affect the role of the company, our business model, our structure, and future results of operations. Some or all of our
functions could be transferred to other institutions, and we could cease to exist as a stockholder-owned company or at all.
If any of these events were to occur, our shares could further diminish in value, or cease to have any value, and there can
be no assurance that our stockholders would receive any compensation for such loss in value.
     On February 11, 2011, the Administration delivered a report to Congress that lays out the Administration’s plan to
reform the U.S. housing finance market, including options for structuring the government’s long-term role in a housing
finance system in which the private sector is the dominant provider of mortgage credit. The report recommends winding
down Freddie Mac and Fannie Mae, stating that the Administration will work with FHFA to determine the best way to
responsibly reduce the role of Freddie Mac and Fannie Mae in the market and ultimately wind down both institutions. The
report identifies a number of policy levers that could be used to wind down Freddie Mac and Fannie Mae, shrink the
government’s footprint in housing finance, and help bring private capital back to the mortgage market, including
increasing guarantee fees, phasing in a 10% down payment requirement, reducing conforming loan limits, and winding
down Freddie Mac and Fannie Mae’s investment portfolios, consistent with the senior preferred stock purchase
agreements.
     A number of bills were introduced in the Senate and House in 2011 concerning the future state of Freddie Mac and
Fannie Mae. Several of these bills take a comprehensive approach that would wind down Freddie Mac and Fannie Mae
(or completely restructure the companies), while other bills would revise the companies’ operations in a limited manner.
Congress also held hearings related to the long-term future of housing finance, including the role of Freddie Mac and
Fannie Mae. We expect additional legislation relating to Freddie Mac and Fannie Mae to be introduced and considered by
Congress; however, we cannot predict whether or when any such legislation will be enacted. On February 2, 2012, the
Administration announced that it expects to provide more detail concerning approaches to reform the U.S. housing finance
market in the spring, and that it plans to begin exploring options for legislation more intensively with Congress. On
February 21, 2012, FHFA sent to Congress a strategic plan for the next phase of the conservatorships of Freddie Mac and
Fannie Mae.
     For more information on the Administration’s February 2011 report, GSE reform legislation, and FHFA’s strategic
plan, see “BUSINESS — Regulation and Supervision — Legislative and Regulatory Developments.”
     In addition to legislative actions, FHFA has expansive regulatory authority over us, and the manner in which FHFA
will use its authority in the future is unclear. FHFA could take a number of regulatory actions that could materially
adversely affect our company, such as changing or reinstating our current capital requirements, which are not binding
during conservatorship, or imposing additional restrictions on our portfolio activities or new initiatives.

The conservatorship is indefinite in duration and the timing, conditions, and likelihood of our emerging from
conservatorship are uncertain. Even if the conservatorship is terminated, we would remain subject to the Purchase
Agreement, senior preferred stock, and warrant.
     FHFA has stated that there is no exact time frame as to when the conservatorship may end. Termination of the
conservatorship (other than in connection with receivership) also requires Treasury’s consent under the Purchase
Agreement. There can be no assurance as to when, and under what circumstances, Treasury would give such consent.
There is also significant uncertainty as to what changes may occur to our business structure during or following our
conservatorship, including whether we will continue to exist. It is possible that the conservatorship will end with us being
placed into receivership. The Acting Director of FHFA stated on September 19, 2011 that “it ought to be clear to
everyone as this point, given [Freddie Mac and Fannie Mae’s] losses since being placed into conservatorship and the
terms of the Treasury’s financial support agreements, that [Freddie Mac and Fannie Mae] will not be able to earn their
way back to a condition that allows them to emerge from conservatorship.”
     In addition, Treasury has the ability to acquire almost 80% of our common stock for nominal consideration by
exercising the warrant we issued to it pursuant to the Purchase Agreement. Consequently, the company could effectively
remain under the control of the U.S. government even if the conservatorship was ended and the voting rights of common
stockholders restored. The warrant held by Treasury, the restrictions on our business contained in the Purchase Agreement,
and the senior status of the senior preferred stock issued to Treasury under the Purchase Agreement, if the senior
                                                              46                                                  Freddie Mac
preferred stock has not been redeemed, also could adversely affect our ability to attract new private sector capital in the
future should the company be in a position to seek such capital. Moreover, our draws under Treasury’s funding
commitment, the senior preferred stock dividend obligation, and commitment fees paid to Treasury (commitment fees
have been waived through the first quarter of 2012) could permanently impair our ability to build independent sources of
capital.

We expect to make additional draws under the Purchase Agreement in future periods, which will adversely affect our
future results of operations and financial condition.
     We expect to request additional draws under the Purchase Agreement in future periods. Over time, our dividend
obligation to Treasury on the senior preferred stock will increasingly drive future draws. Although we may experience
period-to-period variability in earnings and comprehensive income, it is unlikely that we will generate net income or
comprehensive income in excess of our annual dividends payable to Treasury over the long term. Dividends to Treasury
on the senior preferred stock are cumulative and accrue at an annual rate of 10% (or 12% in any quarter in which
dividends are not paid in cash) until all accrued dividends are paid in cash.
     The size and timing of our future draws will be determined by our dividend obligation on the senior preferred stock
and a variety of other factors that could adversely affect our net worth. These other factors include the following:
    • how long and to what extent the U.S. economy and housing market, including home prices, remain weak, which
      could increase credit expenses and cause additional other-than-temporary impairments of the non-agency mortgage-
      related securities we hold;
    • foreclosure prevention efforts and foreclosure processing delays, which could increase our expenses;
    • competitiveness with other mortgage market participants, including Fannie Mae;
    • adverse changes in interest rates, the yield curve, implied volatility or mortgage-to-debt OAS, which could increase
      realized and unrealized mark-to-fair value losses recorded in earnings or AOCI;
    • required reductions in the size of our mortgage-related investments portfolio and other limitations on our
      investment activities that reduce the earnings capacity of our investment activities;
    • quarterly commitment fees payable to Treasury, the amount of which has not yet been established and could be
      substantial (Treasury has waived the fee for all quarters of 2011 and the first quarter of 2012). Treasury has
      indicated that it remains committed to protecting taxpayers and ensuring that our future positive earnings are
      returned to taxpayers as compensation for their investment;
    • adverse changes in our funding costs or limitations in our access to public debt markets;
    • establishment of additional valuation allowances for our remaining net deferred tax asset;
    • changes in accounting practices or guidance;
    • effects of the MHA Program and other government initiatives, including any future requirements to reduce the
      principal amount of loans;
    • losses resulting from control failures, including any control failures because of our inability to retain staff;
    • limitations on our ability to develop new products, enter into new lines of business, or increase guarantee and
      related fees;
    • introduction of additional public mission-related initiatives that may adversely impact our financial results; or
    • changes in business practices resulting from legislative and regulatory developments or direction from our
      Conservator.
     Under the Purchase Agreement, the $200 billion cap on Treasury’s funding commitment will increase as necessary to
accommodate any cumulative reduction in our net worth during 2010, 2011, and 2012. Although additional draws under
the Purchase Agreement will allow us to remain solvent and avoid mandatory receivership, they will also increase the
liquidation preference of, and the dividends we owe on, the senior preferred stock. Based on the aggregate liquidation
preference of the senior preferred stock of $72.3 billion (which amount includes the funds requested to address our net
worth deficit as of December 31, 2011), Treasury is entitled to annual cash dividends of $7.23 billion, which exceeds our
annual historical earnings in all but one period. Increases in the already substantial liquidation preference and senior
preferred stock dividend obligation, along with limited flexibility to redeem the senior preferred stock, will adversely
affect our results of operations and financial condition and add to the significant uncertainty regarding our long-term
financial sustainability. This may also cause further negative publicity about our company.
                                                              47                                                  Freddie Mac
Our business objectives and strategies have in some cases been significantly altered since we were placed into
conservatorship, and may continue to change, in ways that negatively affect our future financial condition and results
of operations.
      FHFA, as Conservator, has directed the company to focus on managing to a positive stockholders’ equity. At the
direction of the Conservator, we have made changes to certain business practices that are designed to provide support for
the mortgage market in a manner that serves our public mission and other non-financial objectives but may not contribute
to our goal of managing to a positive stockholders’ equity. Some of these changes have increased our expenses or caused
us to forego revenue opportunities. For example, FHFA has directed that we implement various initiatives under the MHA
Program. We expect to incur significant costs associated with the implementation of these initiatives and we cannot
currently estimate whether, or the extent to which, costs incurred in the near term from these initiatives may be offset, if
at all, by the prevention or reduction of potential future costs of serious delinquencies and foreclosures due to these
initiatives. On October 24, 2011, FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to
HARP in an effort to attract more eligible borrowers whose monthly payments are current and who can benefit from
refinancing their home mortgages. There can be no assurance that the revisions to HARP will be successful in achieving
these objectives or that any benefits from the revised program will exceed our costs. The Conservator and Treasury have
also not authorized us to engage in certain business activities and transactions, including the purchase or sale of certain
assets, which we believe might have had a beneficial impact on our results of operations or financial condition, if
executed. Our inability to execute such initiatives and transactions may adversely affect our profitability. Other agencies of
the U.S. government, as well as Congress, also have an interest in the conduct of our business. We do not know what
actions they may request us to take.
      In view of the conservatorship and the reasons stated by FHFA for its establishment, it is likely that our business
model and strategic objectives will continue to change, possibly significantly, including in pursuit of our public mission
and other non-financial objectives. Among other things, we could experience significant changes in the size, growth, and
characteristics of our guarantee activities, and we could further change our operational objectives, including our pricing
strategy in our core mortgage guarantee business. The conservatorship has significantly impacted our investment activity,
and we may face further restrictions on this activity. Accordingly, our strategic and operational focus may not always be
consistent with the generation of net income. It is possible that we will make material changes to our capital strategy and
to our accounting policies, methods, and estimates. In addition, we may be directed to engage in initiatives that are
operationally difficult or costly to implement, or that adversely affect our financial results. For example, FHFA has
directed us to take various actions in support of the objectives of a gradual transition to greater private capital
participation in housing finance and greater distribution of risk to participants other than the government, such as
developing security structures that allow for private sector risk sharing.
     On December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011.
Among its provisions, this new law directs FHFA to require Freddie Mac and Fannie Mae to increase guarantee fees by
no less than 10 basis points above the average guarantee fees charged in 2011 on single-family mortgage-backed
securities. Under the law, the proceeds from this increase will be remitted to Treasury to fund the payroll tax cut, rather
than retained by the companies. It is currently unclear what effect this increase or any further guarantee fee increases or
other fee adjustments associated with this law will have on the future profitability and operations of our single-family
guarantee business, or on our ability to raise guarantee fees that may be retained by us. While we continue to assess the
impact of this law on us, we currently believe that implementation of this law will present operational and accounting
challenges for us.
     FHFA has stated that it has focused Freddie Mac and Fannie Mae on their existing core business, including
minimizing credit losses, and taking actions necessary to advance the goals of the conservatorship, and is not permitting
Freddie Mac and Fannie Mae to offer new products or enter into new lines of business. FHFA stated that the focus of the
conservatorship is on conserving assets, minimizing corporate losses, ensuring Freddie Mac and Fannie Mae continue to
serve their mission, overseeing remediation of identified weaknesses in corporate operations and risk management, and
ensuring that sound corporate governance principles are followed. These and other restrictions imposed by FHFA could
adversely affect our financial results in future periods.
     As our Conservator, FHFA possesses all of the powers of our stockholders, officers, and directors. During the
conservatorship, the Conservator has delegated certain authority to the Board of Directors to oversee, and to management
to conduct, day-to-day operations so that the company can continue to operate in the ordinary course of business. FHFA
has the ability to withdraw or revise its delegations of authority and override actions of our Board of Directors at any
time. The directors serve on behalf of, and exercise authority as directed by, the Conservator. In addition, FHFA has the
                                                             48                                                  Freddie Mac
power to take actions without our knowledge that could be material to investors and could significantly affect our
financial performance.
    These changes and other factors could have material adverse effects on, among other things, our portfolio growth, net
worth, credit losses, net interest income, guarantee fee income, net deferred tax assets, and loan loss reserves, and could
have a material adverse effect on our future results of operations and financial condition. In light of the significant
uncertainty surrounding these changes, there can be no assurances regarding when, or if, we will return to profitability.

We have a variety of different, and potentially competing, objectives that may adversely affect our financial results and
our ability to maintain positive net worth.
     Based on our charter, other legislation, public statements from Treasury and FHFA officials and guidance and
directives from our Conservator, we have a variety of different, and potentially competing, objectives. These objectives
include: (a) minimizing our credit losses; (b) conserving assets; (c) providing liquidity, stability, and affordability in the
mortgage market; (d) continuing to provide additional assistance to the struggling housing and mortgage markets;
(e) managing to a positive stockholders’ equity and reducing the need to draw funds from Treasury pursuant to the
Purchase Agreement; and (f) protecting the interests of the taxpayers. These objectives create conflicts in strategic and
day-to-day decision making that will likely lead to suboptimal outcomes for one or more, or possibly all, of these
objectives. This could lead to negative publicity and damage our reputation. We may face increased operational risk from
these competing objectives. Current portfolio investment and mortgage guarantee activities, liquidity support, loan
modification and refinancing initiatives, and foreclosure forbearance initiatives, including our efforts under the MHA
Program, are intended to provide support for the mortgage market in a manner that serves our public mission and other
non-financial objectives under conservatorship, but may negatively impact our financial results and net worth.

FHFA directives that we and Fannie Mae adopt uniform approaches in some areas could have an adverse impact on
our business or on our competitive position with respect to Fannie Mae.
     FHFA is also Conservator of Fannie Mae, our primary competitor. On multiple occasions, FHFA has directed us and
Fannie Mae to confer and suggest to FHFA possible uniform approaches to particular business and accounting issues and
problems. It is likely that we will receive additional directives in the future. In most such cases, FHFA subsequently
directed us and Fannie Mae to adopt a specific uniform approach. For example:
     • In March 2009, FHFA directed Freddie Mac and Fannie Mae to adopt the HAMP program for modification of
       mortgages that they hold or guarantee, leading to a largely uniform approach to modifications for HAMP-eligible
       borrowers;
     • In February 2010, FHFA directed Freddie Mac and Fannie Mae to work together to standardize definitions for
       mortgage delivery data;
     • In January 2011, FHFA announced that it had directed Freddie Mac and Fannie Mae to work on a joint initiative,
       in coordination with HUD, to consider alternatives for future mortgage servicing structures and servicing
       compensation;
     • In April 2011, FHFA announced a new set of aligned standards for servicing of non-performing loans owned or
       guaranteed by Freddie Mac and Fannie Mae, including a standard modification initiative for borrowers not eligible
       for HAMP modifications;
     • In October 2011, through the revisions to the HARP initiative, FHFA directed us and Fannie Mae to align certain
       aspects of our and Fannie Mae’s respective refinance initiatives; and
     • In December 2011, FHFA announced that the guarantee fee on all single-family residential mortgages sold to
       Freddie Mac and Fannie Mae will increase by 10 basis points to fund the payroll tax cut, effective April 1, 2012.
       This increase is in connection with the implementation of the Temporary Payroll Tax Cut Continuation Act of
       2011.
      We cannot predict the impact on our business of these actions or any similar actions FHFA may require us and
Fannie Mae to take in the future. It is possible that in some areas FHFA could require us and Fannie Mae to take a
uniform approach that, because of differences in our respective businesses, could place Freddie Mac at a competitive
disadvantage to Fannie Mae. We may be required to adopt approaches that are operationally difficult for us to implement.
It also is possible that in some cases identifying, adopting and maintaining a uniform approach could entail higher costs
than would a unilateral approach, and that when market conditions merit a change in a uniform approach, coordinating the
change might entail additional cost and delay. If and when conservatorship ends, market acceptance of a uniform
approach could make it difficult to depart from that approach even if doing so would be economically desirable.
                                                              49                                                  Freddie Mac
We are subject to significant limitations on our business under the Purchase Agreement that could have a material
adverse effect on our results of operations and financial condition.
     The Purchase Agreement includes significant restrictions on our ability to manage our business, including limitations
on the amount of indebtedness we may incur, the size of our mortgage-related investments portfolio, and the
circumstances in which we may pay dividends, transfer certain assets, raise capital, and pay down the liquidation
preference on the senior preferred stock. In addition, the Purchase Agreement provides that we may not enter into any
new compensation arrangements or increase amounts or benefits payable under existing compensation arrangements of
any executive officers without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury. In
deciding whether or not to consent to any request for approval it receives from us under the Purchase Agreement,
Treasury has the right to withhold its consent for any reason and is not required by the agreement to consider any
particular factors, including whether or not management believes that the transaction would benefit the company. The
limitations under the Purchase Agreement could have a material adverse effect on our future results of operations and
financial condition.

Our regulator may, and in some cases must, place us into receivership, which would result in the liquidation of our
assets and terminate all rights and claims that our stockholders and creditors may have against our assets or under our
charter; if we are liquidated, there may not be sufficient funds to pay the secured and unsecured claims of the
company, repay the liquidation preference of any series of our preferred stock, or make any distribution to the holders
of our common stock.
     We could be put into receivership at the discretion of the Director of FHFA at any time for a number of reasons,
including conditions that FHFA has already asserted existed at the time the then Director of FHFA placed us into
conservatorship. These include: a substantial dissipation of assets or earnings due to unsafe or unsound practices; the
existence of an unsafe or unsound condition to transact business; an inability to meet our obligations in the ordinary
course of business; a weakening of our condition due to unsafe or unsound practices or conditions; critical
undercapitalization; the likelihood of losses that will deplete substantially all of our capital; or by consent. In addition,
FHFA could be required to place us in receivership if Treasury is unable to provide us with funding requested under the
Purchase Agreement to address a deficit in our net worth. For more information, see “— If Treasury is unable to provide
us with funding requested under the Purchase Agreement to address a deficit in our net worth, FHFA could be required to
place us into receivership.”
      A receivership would terminate the conservatorship. The appointment of FHFA (or any other entity) as our receiver
would terminate all rights and claims that our stockholders and creditors may have against our assets or under our charter
arising as a result of their status as stockholders or creditors, other than the potential ability to be paid upon our
liquidation. Unlike conservatorship, the purpose of which is to conserve our assets and return us to a sound and solvent
condition, the purpose of receivership is to liquidate our assets and resolve claims against us.
     In the event of a liquidation of our assets, there can be no assurance that there would be sufficient proceeds to pay
the secured and unsecured claims of the company, repay the liquidation preference of any series of our preferred stock or
make any distribution to the holders of our common stock. To the extent that we are placed into receivership and do not
or cannot fulfill our guarantee to the holders of our mortgage-related securities, such holders could become unsecured
creditors of ours with respect to claims made under our guarantee. Only after paying the secured and unsecured claims of
the company, the administrative expenses of the receiver and the liquidation preference of the senior preferred stock,
which ranks senior to our common stock and all other series of preferred stock upon liquidation, would any liquidation
proceeds be available to repay the liquidation preference on any other series of preferred stock. Finally, only after the
liquidation preference on all series of preferred stock is repaid would any liquidation proceeds be available for distribution
to the holders of our common stock. The aggregate liquidation preference on the senior preferred stock owned by
Treasury will increase to $72.3 billion upon funding of the draw request to address our net worth deficit as of
December 31, 2011. The liquidation preference will increase further if, as we expect, we make additional draws under the
Purchase Agreement. It will also increase if we do not pay dividends owed on the senior preferred stock in cash or if we
do not pay the quarterly commitment fee to Treasury under the Purchase Agreement.
      If we are placed into receivership or no longer operate as a going concern, we would no longer be able to assert that
we will realize assets and satisfy liabilities in the normal course of business, and, therefore, our basis of accounting would
change to liquidation-based accounting. Under the liquidation basis of accounting, assets are stated at their estimated net
realizable value and liabilities are stated at their estimated settlement amounts, which could adversely affect our net
worth. In addition, the amounts in AOCI would be reclassified to earnings, which could also adversely affect our net
worth.
                                                             50                                                  Freddie Mac
If Treasury is unable to provide us with funding requested under the Purchase Agreement to address a deficit in our
net worth, FHFA could be required to place us into receivership.
     Under the Purchase Agreement, Treasury made a commitment to provide funding, under certain conditions, to
eliminate deficits in our net worth. Under the GSE Act, FHFA must place us into receivership if FHFA determines in
writing that our assets are less than our obligations for a period of 60 calendar days. FHFA has notified us that the
measurement period for any mandatory receivership determination with respect to our assets and obligations would
commence no earlier than the SEC public filing deadline for our quarterly or annual financial statements and would
continue for 60 calendar days after that date. FHFA has also advised us that, if, during that 60-day period, we receive
funds from Treasury in an amount at least equal to the deficiency amount under the Purchase Agreement, the Director of
FHFA will not make a mandatory receivership determination. If funding has been requested under the Purchase Agreement
to address a deficit in our net worth, and Treasury is unable to provide us with such funding within the 60-day period
specified by FHFA, FHFA would be required to place us into receivership if our assets remain less than our obligations
during that 60-day period.

The conservatorship and uncertainty concerning our future has had, and will likely continue to have, an adverse effect
on the retention, recruitment, and engagement of management and other employees, which could have a material
adverse effect on our ability to operate our business.
      Our ability to recruit, retain, and engage management and other employees with the necessary skills to conduct our
business has been, and will likely continue to be, adversely affected by the conservatorship, the uncertainty regarding its
duration, the potential for future legislative or regulatory actions that could significantly affect our existence and our role
in the secondary mortgage market, and the negative publicity concerning the GSEs. Accordingly, we may not be able to
retain or replace executives or other employees with the requisite institutional knowledge and the technical, operational,
risk management, and other key skills needed to conduct our business effectively. We may also face increased operational
risk if key employees leave the company.
     The actions taken by Congress, Treasury, and the Conservator to date, or that may be taken by them or other
government agencies in the future, may have an adverse effect on the retention and recruitment of senior executives,
management, and other valuable employees. For example, we are subject to restrictions on the amount and type of
compensation we may pay our executives under conservatorship. Also contributing to our concerns regarding executive
retention risk is the aggregate level of compensation paid to our Section 16 executive officers, which for 2011
performance was significantly below the 25th percentile of market-based compensation. See “EXECUTIVE
COMPENSATION” for more information. We cannot offer equity-based compensation, which is both common in our
industry and provides a key incentive for employees to stay with the company. The Conservator directed us to maintain
individual salaries and wage rates for all employees at 2010 levels for 2011 and 2012 (except in the case of promotions or
significant changes in responsibilities). Given our current status, we cannot offer the prospects of even medium-term
employment, much less long-term. Continued public condemnation of the company and its employees creates yet another
obstacle to hiring and retaining the talent we need.
      We are finding it difficult to retain and engage critical employees and attract people with the skills and experience
we need. Voluntary attrition rates for high performing employees, those with specialized skill sets, and those responsible
for controls over financial reporting have risen markedly since we were placed into conservatorship. This has led to
concerns about staffing inadequacies, management depth, and employee engagement. Attracting qualified senior
executives is particularly difficult. We operate in an environment in which virtually every business decision is closely
scrutinized and subject to public criticism and review by various government authorities. Many executives are unwilling to
work in such an environment for potentially significantly less than what they could earn elsewhere. A recovering economy
is likely to put additional pressures on turnover in 2012, as other attractive opportunities may become available to people
who we want to retain. The high and increasing level of scrutiny from FHFA and its Office of Inspector General and other
regulators has also heightened stress levels throughout the organization and placed additional burdens on staff.
     In 2011, the Financial Services Committee of the House of Representatives approved a bill that would generally put
our employees on the federal government’s pay scale, and in 2012 the House and Senate each approved legislation
containing a provision that would prohibit senior executives from receiving bonuses during conservatorship. If this or
similar legislation were to become law, many of our employees would experience a sudden and sharp decrease in
compensation. The Acting Director of FHFA stated on November 15, 2011 that this “would certainly risk a substantial
exodus of talent, the best leaving first in many instances. [Freddie Mac and Fannie Mae] likely would suffer a rapidly
growing vacancy list and replacements with lesser skills and no experience in their specific jobs. A significant increase in
safety and soundness risks and in costly operational failures would, in my opinion, be highly likely.” The Acting Director
                                                              51                                                  Freddie Mac
noted that ‘‘[s]hould the risks I fear materialize, FHFA might well be forced to limit [Freddie Mac and Fannie Mae’s]
business activities. Some of the business [Freddie Mac and Fannie Mae] would be unable to undertake might simply not
occur, with potential disruption in housing markets and the economy.” For more information on legislative developments
affecting compensation, see “BUSINESS — Regulation and Supervision — Legislative and Regulatory Developments —
Legislation Related to Reforming Freddie Mac and Fannie Mae.”

The conservatorship and investment by Treasury has had, and will continue to have, a material adverse effect on our
common and preferred stockholders.
     Prior to our entry into conservatorship, the market price for our common stock declined substantially. After our entry
into conservatorship, the market price of our common stock continued to decline, and has been $1 or less per share since
June 2010. As a result, the investments of our common and preferred stockholders lost substantial value, which they may
never recover. There is significant uncertainty as to what changes may occur to our business structure during or following
our conservatorship, including whether we will continue to exist. Therefore, it is likely that our shares could further
diminish in value, or cease to have any value. The Acting Director of FHFA has stated that ‘‘[Freddie Mac and Fannie
Mae’s] equity holders retain an economic claim on the companies but that claim is subordinate to taxpayer claims. As a
practical matter, taxpayers are not likely to be repaid in full, so [Freddie Mac and Fannie Mae] stock lower in priority is
not likely to have any value.”
     The conservatorship and investment by Treasury has had, and will continue to have, other material adverse effects on
our common and preferred stockholders, including the following:
    • No voting rights during conservatorship. The rights and powers of our stockholders are suspended during the
      conservatorship and our common stockholders do not have the ability to elect directors or to vote on other matters.
    • No longer managed to maximize stockholder returns. Because we are in conservatorship, we are no longer
      managed with a strategy to maximize stockholder returns. FHFA has stated that it has focused Freddie Mac and
      Fannie Mae on their existing core business, including minimizing credit losses, and taking actions necessary to
      advance the goals of the conservatorship. FHFA stated that it is not permitting Freddie Mac and Fannie Mae to
      offer new products or enter into new lines of business. FHFA stated that the focus of the conservatorship is on
      conserving assets, minimizing corporate losses, ensuring Freddie Mac and Fannie Mae continue to serve their
      mission, overseeing remediation of identified weaknesses in corporate operations and risk management, and
      ensuring that sound corporate governance principles are followed.
    • Priority of Senior Preferred Stock. The senior preferred stock ranks senior to the common stock and all other
      series of preferred stock as to both dividends and distributions upon dissolution, liquidation or winding up of the
      company.
    • Dividends have been eliminated. The Conservator has eliminated dividends on Freddie Mac common and
      preferred stock (other than dividends on the senior preferred stock) during the conservatorship. In addition, under
      the terms of the Purchase Agreement, dividends may not be paid to common or preferred stockholders (other than
      on the senior preferred stock) without the consent of Treasury, regardless of whether or not we are in
      conservatorship.
    • Warrant may substantially dilute investment of current stockholders. If Treasury exercises its warrant to purchase
      shares of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a
      fully diluted basis, the ownership interest in the company of our then existing common stockholders will be
      substantially diluted. It is possible that stockholders, other than Treasury, will not own more than 20.1% of our
      total common stock for the duration of our existence. Under our charter, bylaws and applicable law, 20.1% is
      insufficient to control the outcome of any vote that is presented to the common stockholders. Accordingly, existing
      common stockholders have no assurance that, as a group, they will be able to control the election of our directors
      or the outcome of any other vote after the time, if any, that the conservatorship ends.

Competitive and Market Risks
Our investment activity is significantly limited under the Purchase Agreement and by FHFA, which will likely reduce
our earnings from investment activities over time and result in greater reliance on our guarantee activities to generate
revenue.
     We are subject to significant limitations on our investment activity, which will adversely affect the earnings capacity
of our mortgage-related investments portfolio over time. These limitations include: (a) a requirement to reduce the size of
                                                             52                                                 Freddie Mac
our mortgage-related investments portfolio; and (b) significant constraints on our ability to purchase or sell mortgage
assets.
      Under the terms of the Purchase Agreement and FHFA regulation, our mortgage-related investments portfolio is
subject to a cap that decreases by 10% each year until the portfolio reaches $250 billion. As a result, the UPB of our
mortgage-related investments portfolio could not exceed $729 billion as of December 31, 2011 and may not exceed
$656.1 billion as of December 31, 2012. Our mortgage-related investments portfolio has contracted considerably since we
entered into conservatorship, and we are working with FHFA to identify ways to prudently accelerate the rate of
contraction of the portfolio. Our ability to take advantage of opportunities to purchase or sell mortgage assets at attractive
prices has been, and likely will continue to be, limited. In addition, we can provide no assurance that the cap on our
mortgage-related investments portfolio will not, over time, force us to sell mortgage assets at unattractive prices,
particularly given the potential in coming periods for continued high volumes of loan modifications and removal of
seriously delinquent loans, both of which result in the removal of mortgage loans from our PCs for our mortgage-related
investments portfolio. We expect that our holdings of unsecuritized single-family loans will continue to increase in 2012
due to the recent revisions to HARP, which will result in our purchase of mortgage loans with LTV ratios greater than
125%, as we have not yet implemented a securitization process for such loans. For more information on the various
restrictions and limitations on our investment activity and our mortgage-related investments portfolio, see “BUSINESS —
Conservatorship and Related Matters — Impact of Conservatorship and Related Actions on Our Business — Limits on
Investment Activity and Our Mortgage-Related Investments Portfolio.”
     These limitations will reduce the earnings capacity of our mortgage-related investments portfolio business and require
us to place greater emphasis on our guarantee activities to generate revenue. However, under conservatorship, our ability
to generate revenue through guarantee activities may be limited, as we may be required to adopt business practices that
provide support for the mortgage market in a manner that serves our public mission and other non-financial objectives,
but that may negatively impact our future financial results from guarantee activities. The combination of the restrictions
on our business activities under the Purchase Agreement and FHFA regulation, combined with our potential inability to
generate sufficient revenue through our guarantee activities to offset the effects of those restrictions, may have an adverse
effect on our results of operations and financial condition. There can be no assurance that the current profitability levels
on our new single-family business would be sufficient to attract new private sector capital in the future, should the
company be in a position to seek such capital. We generally must obtain FHFA’s approval in order to increase pricing in
our guarantee business, and there can be no assurance FHFA will approve any such request. On December 23, 2011,
President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. Our business and financial
condition will not benefit from the increases in guarantee fees under this law, as we must remit the proceeds from such
increases to Treasury. It is currently unclear what effect this will have on our ability to raise guarantee fees that may be
retained by us. For more information, see “BUSINESS — Regulation and Supervision — Legislative and Regulatory
Developments — Legislated Increase to Guarantee Fees.”

We are subject to mortgage credit risks, including mortgage credit risk relating to off-balance sheet arrangements;
increased credit costs related to these risks could adversely affect our financial condition and/or results of operations.
     Mortgage credit risk is the risk that a borrower will fail to make timely payments on a mortgage we own or
guarantee, exposing us to the risk of credit losses and credit-related expenses. We are primarily exposed to mortgage
credit risk with respect to the single-family and multifamily loans that we own or guarantee and hold on our consolidated
balance sheets. We are also exposed to mortgage credit risk with respect to securities and guarantee arrangements that are
not reflected as assets on our consolidated balance sheets. These relate primarily to: (a) Freddie Mac mortgage-related
securities backed by multifamily loans; (b) certain Other Guarantee Transactions; and (c) other guarantee commitments,
including long-term standby commitments and liquidity guarantees.
     Significant factors that affect the level of our single-family mortgage credit risk include the credit profile of the
borrower (e.g., credit score, credit history, and monthly income relative to debt payments), documentation level, the
number of borrowers, the features of the mortgage loan, occupancy type, the type of property securing the mortgage, the
LTV ratio of the loan, and local and regional economic conditions, including home prices and unemployment rates. Our
credit losses will remain high for the foreseeable future due to the substantial number of mortgage loans in our single-
family credit guarantee portfolio on which borrowers owe more than their home is currently worth, as well as the
substantial inventory of seriously delinquent loans.
     While mortgage interest rates remained low in 2011, many borrowers may not have been able to refinance into lower
interest mortgages or reduce their monthly payments through mortgage modifications due to substantial declines in home
values, market uncertainty, and continued high unemployment rates. Therefore, there can be no assurance that continued
                                                              53                                                 Freddie Mac
low mortgage interest rates or efforts to modify and refinance mortgages pursuant to the MHA Program (including
pursuant to the revisions to HARP announced in October 2011) and to modify mortgages under our other loss mitigation
initiatives will reduce our overall mortgage credit risk.

     We also continue to have significant amounts of mortgage loans in our single-family credit guarantee portfolio with
certain characteristics, such as Alt-A, interest-only, option ARMs, loans with original LTV ratios greater than 90%, and
loans where borrowers had FICO scores less than 620 at the time of origination, that expose us to greater credit risk than
do other types of mortgage loans. As of December 31, 2011, loans with one or more of the above characteristics
comprised approximately 20% of our single-family credit guarantee portfolio. See “Table 50 — Certain Higher-Risk
Categories in the Single-Family Credit Guarantee Portfolio” for more information.
     Beginning in 2008, the conforming loan limits were significantly increased for mortgages originated in certain “high
cost” areas (the initial increases applied to loans originated after July 1, 2007). Due to our relative lack of experience with
these “conforming jumbo” loans, purchases pursuant to the high cost conforming loan limits may also expose us to greater
credit risks.
     The level of our multifamily mortgage credit risk is affected by the mortgaged property’s ability to generate rental
income from which debt service can be paid. That ability in turn is affected by rental market conditions (e.g., rental and
vacancy rates), the physical condition of the property, the quality of the property’s management, and the level of operating
costs. For certain multifamily mortgage products, we utilize other forms of credit enhancement, such as subordination
through Other Guarantee Transactions, which are intended to reduce our risk exposure.

     A risk we continue to monitor is that multifamily borrowers will default if they are unable to refinance their loans at
an affordable rate. This risk is particularly important with respect to multifamily loans because such loans generally have
a balloon payment and typically have a shorter contractual term than single-family mortgages. Borrowers may be less able
to refinance their obligations during periods of rising interest rates or weak economic conditions, which could lead to
default if the borrower is unable to find affordable refinancing. However, of the $116.1 billion in UPB of loans in our
multifamily mortgage portfolio as of December 31, 2011, only approximately 3% and 5% will reach their maturity during
2012 and 2013, respectively.

We are exposed to significant credit risk related to the subprime, Alt-A, and option ARM loans that back the non-
agency mortgage-related securities we hold.

     Our investments in non-agency mortgage-related securities include securities that are backed by subprime, Alt-A, and
option ARM loans. As of December 31, 2011, such securities represented approximately 54% of our total investments in
non-agency mortgage-related securities. Since 2007, mortgage loan delinquencies and credit losses in the U.S. mortgage
market have substantially increased, particularly in the subprime, Alt-A, and option ARM sectors of the residential
mortgage market. In addition, home prices have declined significantly, after extended periods during which home prices
appreciated. As a result, the fair value of these investments has declined significantly since 2007, and we have recorded
substantial other-than-temporary impairments, which has adversely impacted stockholders equity (deficit). In addition,
most of these investments do not trade in a liquid secondary market and the size of our holdings relative to normal market
activity is such that, if we were to attempt to sell a significant quantity of these securities, the pricing in such markets
could be significantly disrupted and the price we ultimately realize may be materially lower than the value at which we
carry these investments on our consolidated balance sheets.
     We could experience additional GAAP losses due to other-than-temporary impairments on our investments in these
non-agency mortgage-related securities if, among other things: (a) interest rates change; (b) delinquency and loss rates on
subprime, Alt-A, and option ARM loans increase; (c) there is a further decline in actual or forecasted home prices; or
(d) there is a deterioration in servicing performance. In addition, the fair value of these investments may decline further
due to additional ratings downgrades or market events. Any credit enhancements covering these securities, including
subordination and other structural enhancements, may not prevent us from incurring losses. During 2011, we continued to
experience the erosion of structural credit enhancements on many securities backed by subprime first lien, option ARM,
and Alt-A loans due to poor performance of the underlying mortgages. The financial condition of bond insurers also
continued to deteriorate in 2011. See “MD&A — CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in
Securities” for information about the credit ratings for these securities and the extent to which these securities have been
downgraded.
                                                              54                                                 Freddie Mac
Certain strategies to mitigate our losses as an investor in non-agency mortgage-related securities may adversely affect
our relationships with some of our largest seller/servicers.
     On September 2, 2011, FHFA announced that, as Conservator for Freddie Mac and Fannie Mae, it had filed lawsuits
against 17 financial institutions and related defendants alleging: (a) violations of federal securities laws; and (b) in certain
lawsuits, common law fraud in the sale of residential non-agency mortgage-related securities to Freddie Mac and Fannie
Mae. These institutions include some of our largest seller/servicers and counterparties. FHFA, as Conservator, filed a
similar lawsuit against UBS Americas, Inc. and related defendants on July 27, 2011. FHFA seeks to recover losses and
damages sustained by Freddie Mac and Fannie Mae as a result of their investments in certain residential non-agency
mortgage-related securities issued by these financial institutions.
     At the direction of our Conservator, we are working to enforce our rights as an investor with respect to the non-
agency mortgage-related securities we hold, and are engaged in other efforts to mitigate losses on our investments in these
securities, in some cases in conjunction with other investors. For example, FHFA, as Conservator of Freddie Mac and
Fannie Mae, has issued subpoenas to various entities seeking loan files and other transaction documents related to non-
agency mortgage-related securities in which the two enterprises invested. FHFA stated that the documents will enable it to
determine whether issuers of these securities and others are liable to Freddie Mac and Fannie Mae for certain losses they
have suffered on the securities. We are assisting FHFA in this effort.
     These and other loss mitigation efforts may lead to further disputes with some of our largest seller/servicers and
counterparties that may result in further litigation. This could adversely affect our relationship with any such company and
could, for example, result in the loss of some or all of our business with a large seller/servicer. The effectiveness of these
loss mitigation efforts is highly uncertain and any potential recoveries may take significant time to realize. For more
information, see “MD&A — RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Non-Agency Mortgage-
Related Security Issuers.”

The credit losses we experience in future periods as a result of the housing and economic downturn are likely to be
larger, perhaps substantially larger, than our current loan loss reserves.
     Our loan loss reserves, as reflected on our consolidated balance sheets, do not reflect the total of all future credit
losses we will ultimately incur with respect to our single-family and multifamily mortgage loans, including those
underlying our financial guarantees. Rather, pursuant to GAAP, our reserves only reflect probable losses we believe we
have already incurred as of the balance sheet date. Accordingly, although we believe that our credit losses may exceed the
amounts we have already reserved for loans currently identified as impaired, and that additional credit losses will be
incurred in the future due to the housing and economic downturn, we are not permitted under GAAP to reflect the
potential impact of these future trends in our loan loss reserves. As a result of the depth and extent of the housing and
economic downturn, there is significant uncertainty regarding the full extent of future credit losses. Therefore, such credit
losses are likely to be larger, perhaps substantially larger, than our current loan loss reserves. Additional credit losses we
incur in future periods will adversely affect our business, results of operations, financial condition, liquidity, and net
worth.

Further declines in U.S. home prices or other adverse changes in the U.S. housing market could negatively impact our
business and increase our losses.
     Throughout 2011, the U.S. housing market continued to experience adverse trends, including continued price
depreciation, continued high serious delinquency and default rates, and extended foreclosure timelines. Low volumes of
home sales and the continued large supply of unsold homes placed further downward pressure on home prices. These
conditions, coupled with continued high unemployment, led to continued high loan delinquencies and provisioning for
loan losses. Our credit losses remained high in 2011, in part because home prices have experienced significant cumulative
declines in many geographic areas in recent years. We expect that national average home prices will continue to remain
weak and will likely decline over the near term, which could result in a continued high rate of serious delinquencies or
defaults and a level of credit-related losses higher than our expectations when our guarantees were issued.
      We prepare internal forecasts of future home prices, which we use for certain business activities, including:
(a) hedging prepayment risk; (b) setting fees for new guarantee business; and (c) portfolio activities. It is possible that
home price declines could be significantly greater than we anticipate, or that a sustained recovery in home prices would
not begin until much later than we anticipate, which could adversely affect our performance of these business activities.
For example, this could cause the return we earn on new single-family guarantee business to be less than expected. This
could also result in higher losses due to other-than-temporary impairments on our investments in non-agency mortgage-
related securities than would otherwise be recognized in earnings. Government programs designed to strengthen the
                                                               55                                                  Freddie Mac
U.S. housing market, such as the MHA Program, may fail to achieve expected results, and new programs could be
instituted that cause our credit losses to increase. For more information, see “MD&A — RISK MANAGEMENT — Credit
Risk.”
     Our business volumes are closely tied to the rate of growth in total outstanding U.S. residential mortgage debt and
the size of the U.S. residential mortgage market. Total residential mortgage debt declined approximately 1.8% in the first
nine months of 2011 (the most recent data available) compared to a decline of approximately 3.2% in 2010. If total
outstanding U.S. residential mortgage debt were to continue to decline, there could be fewer mortgage loans available for
us to purchase, and we could face more competition to purchase a smaller number of loans.
     While multifamily market fundamentals (i.e., vacancy rates and effective rents) improved during 2011, there can be
no assurance that this trend will continue. Certain local multifamily markets exhibit relatively weak fundamentals,
especially some of those hit hardest by residential home price declines. Any further softening of the broader economy
could have negative impacts on multifamily markets, which could cause delinquencies and credit losses relating to our
multifamily activities to increase beyond our current expectations.

Our refinance volumes could decline if interest rates rise, which could cause our overall new mortgage-related security
issuance volumes to decline.
     We continued to experience a high percentage of refinance mortgages in our purchase volume during 2011 due to
continued low interest rates and the impact of our relief refinance mortgages. Interest rates have been at historically low
levels for an extended period of time. Overall originations of refinance mortgages, and our purchases of them, will likely
decrease if interest rates rise and home prices remain at depressed levels. Originations of refinance mortgages will also
likely decline after the Home Affordable Refinance Program expires in December 2013. In addition, many eligible
borrowers have already refinanced at least once during this period of low interest rates, and therefore may be unlikely to
do so again in the near future. It is possible that our overall mortgage-related security issuance volumes could decline if
our volumes of purchase money mortgages do not increase to offset any such decrease in refinance mortgages. This could
adversely affect the amount of revenue we receive from our guarantee activities.

We could incur significant credit losses and credit-related expenses in the event of a major natural disaster or other
catastrophic event in geographic areas in which portions of our total mortgage portfolio and REO holdings are
concentrated.
     We own or guarantee mortgage loans and own REO properties throughout the United States. The occurrence of a
major natural or environmental disaster (such as an earthquake, hurricane, tsunami, or widespread damage caused to the
environment by commercial entities), terrorist attack, pandemic, or similar catastrophic event in a regional geographic area
of the United States could negatively impact our credit losses and credit-related expenses in the affected area.
      The occurrence of a catastrophic event could negatively impact a geographic area in a number of different ways,
depending on the nature of the event. A catastrophic event that either damaged or destroyed residential real estate
underlying mortgage loans we own or guarantee or negatively impacted the ability of homeowners to continue to make
principal and interest payments on mortgage loans we own or guarantee could increase our serious delinquency rates and
average loan loss severity in the affected region or regions, which could have a material adverse effect on our business,
results of operations, financial condition, liquidity and net worth. Such an event could also damage or destroy REO
properties we own. While we attempt to maintain a geographically diverse portfolio, there can be no assurance that a
catastrophic event, depending on its magnitude, scope and nature, will not generate significant credit losses and credit-
related expenses. We may not have insurance coverage for some of these catastrophic events. In some cases, we may be
prohibited by state law from requiring such insurance as a condition to our purchasing or guaranteeing loans.

We depend on our institutional counterparties to provide services that are critical to our business, and our results of
operations or financial condition may be adversely affected if one or more of our institutional counterparties do not
meet their obligations to us.
     We face the risk that one or more of the institutional counterparties that has entered into a business contract or
arrangement with us may fail to meet its obligations. We face similar risks with respect to contracts or arrangements we
benefit from indirectly or that we enter into on behalf of our securitization trusts. Our primary exposures to institutional
counterparty risk are with:
     • mortgage seller/servicers;
     • mortgage insurers;
                                                              56                                                 Freddie Mac
     • issuers, guarantors or third-party providers of other credit enhancements (including bond insurers);
     • counterparties to short-term lending and other investment-related agreements and cash equivalent transactions,
       including such agreements and transactions we manage for our PC trusts;
     • derivative counterparties;
     • hazard and title insurers;
     • mortgage investors and originators; and
     • document custodians and funds custodians.
     Many of our counterparties provide several types of services to us. In some cases, our business with institutional
counterparties is concentrated. The concentration of our exposure to our counterparties increased in recent periods due to
industry consolidation and counterparty failures, and we continue to face challenges in reducing our risk concentrations
with counterparties. Efforts we take to reduce exposure to financially weakened counterparties could further increase our
exposure to other individual counterparties. In the future, our mortgage insurance exposure will be concentrated among a
smaller number of counterparties. A significant failure by a major institutional counterparty could harm our business and
financial results in a variety of ways, including by adversely affecting our ability to conduct operations efficiently and at
cost-effective rates, and have a material adverse effect on our investments in mortgage loans, investments in securities, our
derivative portfolio or our credit guarantee activities. See “NOTE 16: CONCENTRATION OF CREDIT AND OTHER
RISKS” for additional information.
     Some of our counterparties may become subject to serious liquidity problems affecting their businesses, either
temporarily or permanently, which may adversely affect their ability to meet their obligations to us. In recent periods,
challenging market conditions have adversely affected the liquidity and financial condition of our counterparties. These
trends may continue. In particular, we believe all of our derivative portfolio and cash and other investments portfolio
counterparties are exposed to fiscally troubled European countries. It is possible that continued adverse developments in
the Eurozone could significantly impact such counterparties. In turn, this could adversely affect their ability to meet their
obligations to us.
     In the past few years, some of our largest seller/servicers have experienced ratings downgrades and liquidity
constraints, and certain large lenders have failed. These challenging market conditions could also increase the likelihood
that we will have disputes with our counterparties concerning their obligations to us, especially with respect to
counterparties that have experienced financial strain and/or have large exposures to us. See “MD&A — RISK
MANAGEMENT — Credit Risk — Institutional Credit Risk” for additional information regarding our credit risks to
certain categories of counterparties and how we seek to manage them.
     The servicing of mortgage loans backing our single-family non-agency mortgage-related securities investments is
concentrated in a small number of institutions. We could experience losses on these investments from servicing
performance deterioration should one of these institutions come under financial distress. Furthermore, Freddie Mac’s
rights as a non-agency mortgage-related securities investor to transfer servicing are limited.

Our financial condition or results of operations may be adversely affected if mortgage seller/servicers fail to repurchase
loans sold to us in breach of representations and warranties or fail to honor any related indemnification or recourse
obligations.
      We require seller/servicers to make certain representations and warranties regarding the loans they sell to us. If loans
are sold to us in breach of those representations and warranties, we have the contractual right to require the seller/servicer
to repurchase those loans from us. In lieu of repurchase, we may agree to allow a seller/servicer to indemnify us against
losses on such mortgages or otherwise compensate us for the risk of continuing to hold the mortgages. Sometimes a
seller/servicer sells us mortgages with recourse, meaning that the seller/servicer agrees to repurchase any mortgage that is
delinquent for more than a specified period (usually 120 days), regardless of whether there has been a breach of
representations and warranties.
     Some of our seller/servicers have failed to fully perform their repurchase obligations due to lack of financial
capacity, while others, including many of our larger seller/servicers, have not fully performed their repurchase obligations
in a timely manner. As of December 31, 2011 and 2010, the UPB of loans subject to repurchase requests based on
breaches of representations and warranties issued to our single-family seller/servicers was approximately $2.7 billion and
$3.8 billion, respectively. As of December 31, 2011, approximately $1.2 billion of such loans were subject to repurchase
requests issued due to mortgage insurance rescission or mortgage insurance claim denial.
                                                              57                                                 Freddie Mac
     Our contracts require that a seller/servicer repurchase a mortgage within 30 days after we issue a repurchase request,
unless the seller/servicer avails itself of an appeal process provided for in our contracts, in which case the deadline for
repurchase is extended until we decide the appeal. As of December 31, 2011 and 2010, approximately 39% and 34%,
respectively, of these repurchase requests were outstanding more than four months since issuance of our repurchase
request (these figures included repurchase requests for which appeals were pending).
      The amount we collect on these requests and others we may make in the future could be significantly less than the
UPB of the loans subject to the repurchase requests primarily because we expect many of these requests will likely be
satisfied by reimbursement of our realized credit losses by seller/servicers, instead of repurchase of loans at their UPB, or
may be rescinded in the course of the contractual appeals process. Based on our historical loss experience and the fact
that many of these loans are covered by credit enhancement, we expect the actual credit losses experienced by us should
we fail to collect on these repurchase requests will also be less than the UPB of the loans. We may also enter into
agreements with seller/servicers to resolve claims for repurchases. The amounts we receive under any such agreements
may be less than the losses we ultimately incur.
     Our credit losses may increase to the extent our seller/servicers do not fully perform their repurchase obligations.
Enforcing repurchase obligations of seller/servicers who have the financial capacity to perform those obligations could
also negatively impact our relationships with such customers and could result in the loss of some or all of our business
with such customers, which could negatively impact our ability to retain market share. It may be difficult, expensive, and
time-consuming to legally enforce a seller/servicer’s repurchase obligations, in the event a seller/servicer continues to fail
to perform such obligations.
     On October 24, 2011, FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to HARP.
We may face greater exposure to credit and other losses on these HARP loans because we are not requiring lenders to
provide us with certain representations and warranties on these HARP loans. For more information, see “MD&A — RISK
MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program —
Home Affordable Refinance Program and Relief Refinance Mortgage Initiative.”
     We also have exposure to seller/servicers with respect to mortgage insurance. When a mortgage insurer rescinds
coverage or denies or curtails a claim, we may require the seller/servicer to repurchase the mortgage or to indemnify us
for additional loss. The volume of rescissions, claim denials, and curtailments by mortgage insurers remains high.

We face the risk that seller/servicers may fail to perform their obligations to service loans in our single-family and
multifamily mortgage portfolios or that their servicing performance could decline.
      Our seller/servicers have a significant role in servicing loans in our single-family credit guarantee portfolio, which
includes an active role in our loss mitigation efforts. Therefore, a decline in their performance could impact our credit
performance (including through missed opportunities for mortgage modifications), which could adversely affect our
financial condition or results of operations and have a significant impact on our ability to mitigate credit losses. The risk
of such a decline in performance remains high. The high levels of seriously delinquent loan volume, the ongoing weak
conditions of the mortgage market, and the number and variety of additions and changes to HAMP and our other loan
modification and loss mitigation initiatives have placed a strain on the loss mitigation resources of many of our seller/
servicers. This has also increased the operational complexity of the servicing function, as well as the risk that errors will
occur. A number of seller/servicers have had to address issues relating to the improper preparation and execution of
certain documents used in foreclosure proceedings, which has further strained their resources. There have also been a
number of regulatory developments that have increased, or could increase, the complexity of the servicing function. It is
also possible that we could be directed to introduce additional changes to the servicing function that increase its
complexity, such as new or revised loan modification or loss mitigation initiatives or new compensation arrangements.
Our expected ability to partially mitigate losses through loan modifications and other alternatives to foreclosure is a factor
we consider in determining our allowance for loan losses. Therefore, the inability to realize the anticipated benefits of our
loss mitigation plans could cause our losses to be significantly higher than those currently estimated. Weak economic
conditions continue to affect the liquidity and financial condition of many of our seller/servicers, including some of our
largest seller/servicers. Any efforts we take to attempt to improve our servicers’ performance could adversely affect our
relationships with such servicers, many of which also sell loans to us.
     If a servicer does not fulfill its servicing obligations (including its repurchase or other responsibilities), we may seek
partial or full recovery of the amounts that such servicer owes us, such as by attempting to sell the applicable mortgage
servicing rights to a different servicer and applying the proceeds to such owed amounts, or by contracting the servicing
responsibilities to a different servicer and retaining the net servicing fee. The ongoing weakness in the housing market has
negatively affected the market for mortgage servicing rights, which increases the risk that we might not receive a
                                                              58                                                  Freddie Mac
sufficient price for such rights or that we may be unable to find buyers who: (a) have sufficient capacity to service the
affected mortgages in compliance with our servicing standards; (b) are willing to assume the representations and
warranties of the former servicer regarding the affected mortgages (which we typically require); and (c) have sufficient
capacity to service all of the affected mortgages. Increased industry consolidation, bankruptcies of mortgage bankers or
bank failures may also make it more difficult for us to sell such rights, because there may not be sufficient capacity in the
market, particularly in the event of multiple failures. This option may be difficult to accomplish with respect to our larger
seller/servicers due to operational and capacity challenges of transferring a large servicing portfolio. The financial stress
on servicers and increased costs of servicing may lead to strategic defaults (i.e., defaults done deliberately as a financial
strategy, and not involuntarily) by servicers, which would also require us to seek a successor servicer.
     Our seller/servicers also have a significant role in servicing loans in our multifamily mortgage portfolio. We are
exposed to the risk that multifamily seller/servicers could come under financial pressure, which could potentially cause
degradation in the quality of the servicing they provide us including their monitoring of each property’s financial
performance and physical condition. This could also, in certain cases, reduce the likelihood that we could recover losses
through lender repurchases, recourse agreements, or other credit enhancements, where applicable.
      See “MD&A — RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Single-family Mortgage Seller/
Servicers” and “— Multifamily Mortgage Seller/Servicers” for additional information on our institutional credit risk
related to our mortgage seller/servicers.

Our financial condition or results of operations may be adversely affected by the financial distress of our
counterparties to derivatives, funding, and other transactions.
      We use derivatives for several purposes, including to regularly adjust or rebalance our funding mix in response to
changes in the interest-rate characteristics of our mortgage-related assets and to hedge forecasted issuances of debt. The
relative concentration of our derivative exposure among our primary derivative counterparties remains high. This
concentration increased in the last several years due to industry consolidation and the failure of certain counterparties, and
could further increase. Three of our derivative counterparties each accounted for greater than 10% of our net
uncollateralized exposure, excluding commitments, at December 31, 2011. For a further discussion of our exposure to
derivative counterparties, see “MD&A — RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Derivative
Counterparties” and “NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS.”
     Some of our derivative and other capital markets counterparties have experienced various degrees of financial distress
in the past few years, including liquidity constraints, credit downgrades, and bankruptcy. Our financial condition and
results of operations may be adversely affected by the financial distress of these derivative and other capital markets
counterparties to the extent that they fail to meet their obligations to us. For example, our OTC derivative counterparties
are required to post collateral in certain circumstances to cover our net exposure to them on derivative contracts. We may
incur losses if the collateral held by us cannot be liquidated at prices that are sufficient to cover the amount of such
exposure.
      Our ability to engage in routine derivatives, funding, and other transactions could be adversely affected by the actions
of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty,
or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services
institutions, or the financial services industry generally, could lead to market-wide disruptions in which it may be difficult
for us to find acceptable counterparties for such transactions.
     We also use derivatives to synthetically create the substantive economic equivalent of various debt funding structures.
Thus, if our access to the derivative markets were disrupted, it may become more difficult or expensive to fund our
business activities and achieve the funding mix we desire, which could adversely affect our business and results of
operations.

Our credit losses and other-than-temporary impairments recognized in earnings could increase if our mortgage or bond
insurers become insolvent or fail to perform their obligations to us.
      We are exposed to risk relating to the potential insolvency of or non-performance by mortgage insurers that insure
single-family mortgages we purchase or guarantee and bond insurers that insure certain of the non-agency mortgage-
related securities we hold. The weakened financial condition and liquidity position of these counterparties increases the
risk that these entities will fail to fully reimburse us for claims under insurance policies. This risk could increase if home
prices deteriorate further or if the economy worsens.
                                                               59                                                  Freddie Mac
      As a guarantor, we remain responsible for the payment of principal and interest if a mortgage insurer fails to meet its
obligations to reimburse us for claims. Thus, if any of our mortgage insurers that provide credit enhancement fails to
fulfill its obligation, we could experience increased credit losses. In addition, if a regulator determined that a mortgage
insurer lacked sufficient capital to pay all claims when due, the regulator could take action that might impact the timing
and amount of claim payments made to us. We independently assess the financial condition, including the claims-paying
resources, of each of our mortgage insurers. Based on our analysis of the financial condition of a mortgage insurer and
pursuant to our eligibility requirements for mortgage insurers, we could take action against a mortgage insurer intended to
protect our interests that may impact the timing and amount of claims payments received from that insurer. We expect to
receive substantially less than full payment of our claims from Triad Guaranty Insurance Corp., Republic Mortgage
Insurance Company and PMI Mortgage Insurance Co. We also believe that certain other of our mortgage insurance
counterparties may lack sufficient ability to meet all their expected lifetime claims paying obligations to us as such claims
emerge.
     In the event one or more of our bond insurers were to become insolvent, it is likely that we would not collect all of
our claims from the affected insurer. This would impact our ability to recover certain unrealized losses on our investments
in non-agency mortgage-related securities, and could contribute to net impairment of available-for-sale securities
recognized in earnings. We evaluate the expected recovery from primary bond insurance policies as part of our
impairment analysis for our investments in securities. If a bond insurer’s performance with respect to its obligations on
our investments in securities is worse than expected, this could contribute to additional net impairment of those securities.
In addition, the fair values of our securities may further decline, which could also have a material adverse effect on our
results and financial condition. We expect to receive substantially less than full payment from several of our bond
insurers, including Ambac Assurance Corporation and Financial Guaranty Insurance Company, due to adverse
developments concerning these companies. Ambac Assurance Corporation and Financial Guaranty Insurance Company are
currently not paying any of their claims. We believe that some of our other bond insurers may also lack sufficient ability
to fully meet all of their expected lifetime claims-paying obligations to us as such claims emerge.
   For more information on developments concerning our mortgage insurers and bond insurers, see “MD&A — RISK
MANAGEMENT — Credit Risk — Institutional Credit Risk — Mortgage Insurers” and “— Bond Insurers.”

If mortgage insurers were to further tighten their standards or fall out of compliance with regulatory capital
requirements, the volume of high LTV ratio mortgages available for us to purchase could be reduced, which could
reduce our overall volume of new business. Mortgage insurance standards could constrain our future ability to
purchase loans with LTV ratios over 80%.
     Our charter requires that single-family mortgages with LTV ratios above 80% at the time of purchase be covered by
specified credit enhancements or participation interests. Our purchases of mortgages with LTV ratios above 80% (other
than relief refinance mortgages) have declined in recent years, in part because mortgage insurers tightened their eligibility
requirements with respect to the issuance of insurance on new mortgages with such higher LTV ratios. If mortgage
insurers further restrict their eligibility requirements for such loans, or if we are no longer willing or able to obtain
mortgage insurance from these counterparties under terms we find reasonable, and we are not able to avail ourselves of
suitable alternative methods of obtaining credit enhancement for these loans, we may be further restricted in our ability to
purchase or securitize loans with LTV ratios over 80% at the time of purchase. This could further reduce our overall
volume of new business. This could also negatively impact our ability to participate in a significant segment of the
mortgage market (i.e., loans with LTV ratios over 80%) should we seek, or be directed, to do so.
     If a mortgage insurance company were to fall out of compliance with regulatory capital requirements and not obtain
appropriate waivers, it could become subject to regulatory actions that restrict its ability to write new business in certain,
or in some cases all, states. During the third quarter of 2011, Republic Mortgage Insurance Company and PMI Mortgage
Insurance Co. were prohibited from writing new business by their primary state regulators and neither writes new business
in any state any longer. Given the difficulties in the mortgage insurance industry, we believe it is likely that other
companies may be unable to meet regulatory capital requirements.
      A mortgage insurer may attempt a corporate restructuring designed to enable it to continue to write new business
through a new entity in the event the insurer falls out of compliance with regulatory capital requirements. However, there
can be no assurance that an insurer would be able to accomplish such a restructuring, as the restructured entity would be
required to satisfy regulatory requirements as well as our own conditions. These restructuring plans generally involve
contributing capital to a subsidiary or affiliate. This could result in less liquidity available to the existing mortgage insurer
to pay claims on its existing book of business, and an increased risk that the mortgage insurer would not pay its claims in
full in the future. We monitor the claim paying ability of our mortgage insurers. As these restructuring plans are presented
                                                               60                                                   Freddie Mac
to us for review, we attempt to determine whether the insurers’ plans make available sufficient resources to meet their
obligations to policyholders of the insurance entities involved in the restructuring. However, there can be no assurance that
any such restructuring will enable payment in full of all claims in the future. See “NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES — Allowance for Loan Losses and Reserve for Guarantee Losses — Single-
Family Loans” for more information.

We could incur increased credit losses if our seller/servicers enter into arrangements with mortgage insurers for
settlement of future rescission activity and such agreements could potentially reduce the ability of mortgage insurers to
pay claims to us.
      Under our contracts with our seller/servicers, the rescission or denial of mortgage insurance on a loan is grounds for
us to make a repurchase request to the seller/servicer. At least one of our largest servicers has entered into arrangements
with two of our mortgage insurance counterparties under which the servicer pays and/or indemnifies the insurer in
exchange for the mortgage insurer agreeing not to issue mortgage insurance rescissions or denials of coverage on Freddie
Mac mortgages. When such an agreement is in place, we are unable to make repurchase requests based solely on a
rescission of insurance or denial of coverage. Thus, there is a risk that we will experience higher credit losses if we do not
independently identify other areas of noncompliance with our contractual requirements and require lenders to repurchase
the loans we own. Additionally, there could be a negative financial impact on our mortgage insurers’ ability to pay their
other obligations to us if the payments they receive from the seller/servicers are insufficient to compensate them for the
insurance claims paid that would have otherwise been denied. As guarantor of the insured loans, we remain responsible
for the payment of principal and interest if a mortgage insurer fails to meet its obligation to reimburse us for claims, and
this could increase our credit losses. In April 2011, we issued an industry letter to our servicers reminding them that they
may not enter into these types of agreements without our consent. Several of our servicers have asked us to consent to
these types of agreements. We are evaluating these requests on a case by case basis.

The loss of business volume from key lenders could result in a decline in our market share and revenues.
     Our business depends on our ability to acquire a steady flow of mortgage loans. We purchase a significant percentage
of our single-family mortgages from several large mortgage originators. During 2011 and 2010, approximately 82% and
78%, respectively, of our single-family mortgage purchase volume was associated with our ten largest customers. During
2011, two mortgage lenders (Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A.) each accounted for more than
10% of our single-family mortgage purchase volume and collectively accounted for approximately 40% of our single-
family mortgage purchase volume. Similarly, we acquire a significant portion of our multifamily mortgage loans from
several large lenders.
     We enter into mortgage purchase volume commitments with many of our single-family customers that provide for the
customers to deliver to us a certain volume of mortgages during a specified period of time. Some commitments may also
provide for the lender to deliver to us a minimum percentage of their total sales of conforming loans. There is a risk that
we will not be able to enter into new commitments with our key single-family customers that will maintain mortgage
purchase volume following the expiration of our existing commitments with them. Since 2007, the mortgage industry has
consolidated significantly and a smaller number of large lenders originate most single-family mortgages. The loss of
business from any one of our major lenders could adversely affect our market share and our revenues. Many of our seller/
servicers also have tightened their lending criteria in recent years, which has reduced their loan volume, thus reducing the
volume of loans available for us to purchase.

Ongoing weak business and economic conditions in the U.S. and abroad may adversely affect our business and results
of operations.
     Our business and results of operations are significantly affected by general business and economic conditions,
including conditions in the international markets for our investments or our mortgage-related and debt securities. These
conditions include employment rates, fluctuations in both debt and equity capital markets, the value of the U.S. dollar as
compared to foreign currencies, the strength of the U.S. financial markets and national economy and the local economies
in which we conduct business, and the economies of other countries that purchase our mortgage-related and debt
securities. Concerns about fiscal challenges in several Eurozone economies intensified during 2011, creating significant
uncertainty in the financial markets and potential increased risk exposure for our counterparties and for us. There is also
significant uncertainty regarding the strength of the U.S. economic recovery. If the U.S. economy remains weak, we could
experience continued high serious delinquencies and credit losses, which will adversely affect our results of operations
and financial condition.
                                                             61                                                  Freddie Mac
     The mortgage credit markets continue to be impacted by a decrease in availability of corporate credit and liquidity
within the mortgage industry, causing disruptions to normal operations of major mortgage servicers and, at times,
originators, including some of our largest customers. This has also contributed to significant volatility, wide credit spreads
and a lack of price transparency, and the potential for further consolidation within the financial services industry.

Competition from banking and non-banking companies may harm our business.
      Competition in the secondary mortgage market combined with a decline in the amount of residential mortgage debt
outstanding may make it more difficult for us to purchase mortgages. Furthermore, competitive pricing pressures may
make our products less attractive in the market and negatively impact our financial results. Increased competition from
Fannie Mae, Ginnie Mae, and FHA/VA may alter our product mix, lower volumes, and reduce revenues on new business.
FHFA is also Conservator of Fannie Mae, our primary competitor, and FHFA’s actions as Conservator of both companies
could affect competition between us and Fannie Mae. It is possible that FHFA could require us and Fannie Mae to take a
common approach that, because of differences in our respective businesses, could place Freddie Mac at a competitive
disadvantage to Fannie Mae. Efforts we may make or may be directed to make to increase the profitability of new single-
family guarantee business, such as by tightening credit standards or raising guarantee fees, could cause our market share
to decrease and the volume of our single-family guarantee business to decline. Historically, we also competed with other
financial institutions that retain or securitize mortgages, such as commercial and investment banks, dealers, thrift
institutions, and insurance companies. While many of these institutions have ceased or substantially reduced their
activities in the secondary market for single-family mortgages since 2008, it is possible that these institutions will reenter
the market.
     Beginning in 2010, some market participants began to re-emerge in the multifamily market, and we have faced
increased competition from other institutional investors.
     We could be prevented from competing efficiently and effectively by competitors who use their patent portfolios to
prevent us from using necessary business processes and products, or to require us to pay significant royalties to use those
processes and products.

Our investment activities may be adversely affected by limited availability of financing and increased funding costs.
    The amount, type and cost of our funding, including financing from other financial institutions and the capital
markets, directly impacts our interest expense and results of operations. A number of factors could make such financing
more difficult to obtain, more expensive or unavailable on any terms, both domestically and internationally, including:
     • termination of, or future restrictions or other adverse changes with respect to, government support programs that
       may benefit us;
     • reduced demand for our debt securities;
     • competition for debt funding from other debt issuers; and
     • downgrades in our credit ratings or the credit ratings of the U.S. government.
     Our ability to obtain funding in the public debt markets or by pledging mortgage-related securities as collateral to
other financial institutions could cease or change rapidly, and the cost of available funding could increase significantly
due to changes in market confidence and other factors. For example, in the fall of 2008, we experienced significant
deterioration in our access to the unsecured medium- and long-term debt markets, and were forced to rely on short-term
debt to fund our purchases of mortgage assets and refinance maturing debt and to rely on derivatives to synthetically
create the substantive economic equivalent of various debt funding structures.
     We follow certain liquidity management practices and procedures. However, in the event we were unable to obtain
funding from the public debt markets, there can be no assurance that such practices and procedures would provide us with
sufficient liquidity to meet ongoing cash obligations for an extended period.
     Since 2008, the ratings on the non-agency mortgage-related securities we hold backed by Alt-A, subprime, and
option ARM loans have decreased, limiting their availability as a significant source of liquidity for us through sales or use
as collateral in secured lending transactions. In addition, adverse market conditions have negatively impacted our ability to
enter into secured lending transactions using agency securities as collateral. These trends are likely to continue in the
future.
    The composition of our mortgage-related investments portfolio has changed significantly since we entered into
conservatorship, as our holdings of single-family whole loans have significantly increased and our holdings of agency
                                                              62                                                 Freddie Mac
mortgage-related securities have significantly declined. This changing composition presents heightened liquidity risk,
which influences management’s decisions regarding funding and hedging.

Government Support
     Changes or perceived changes in the government’s support of us could have a severe negative effect on our access to
the debt markets and our debt funding costs. Under the Purchase Agreement, the $200 billion cap on Treasury’s funding
commitment will increase as necessary to accommodate any cumulative reduction in our net worth during 2010, 2011, and
2012. While we believe that the support provided by Treasury pursuant to the Purchase Agreement currently enables us to
maintain our access to the debt markets and to have adequate liquidity to conduct our normal business activities, the costs
of our debt funding could vary due to the uncertainty about the future of the GSEs and potential investor concerns about
the adequacy of funding available to us under the Purchase Agreement after 2012. The cost of our debt funding could
increase if debt investors believe that the risk that we could be placed into receivership is increasing. In addition, under
the Purchase Agreement, without the prior consent of Treasury, we may not increase our total indebtedness above a
specified limit or become liable for any subordinated indebtedness. For more information, see “MD&A — LIQUIDITY
AND CAPITAL RESOURCES — Liquidity — Actions of Treasury and FHFA.”
     We do not currently have a liquidity backstop available to us (other than draws from Treasury under the Purchase
Agreement and Treasury’s ability to purchase up to $2.25 billion of our obligations under its permanent statutory
authority) if we are unable to obtain funding from issuances of debt or other conventional sources. At present, we are not
able to predict the likelihood that a liquidity backstop will be needed, or to identify the alternative sources of liquidity
that might be available to us if needed, other than from Treasury as referenced above.

Demand for Debt Funding
      The willingness of domestic and foreign investors to purchase and hold our debt securities can be influenced by
many factors, including changes in the world economy, changes in foreign-currency exchange rates, regulatory and
political factors, as well as the availability of and preferences for other investments. If investors were to divest their
holdings or reduce their purchases of our debt securities, our funding costs could increase and our business activities
could be curtailed. The willingness of investors to purchase or hold our debt securities, and any changes to such
willingness, may materially affect our liquidity, business and results of operations.

Competition for Debt Funding
     We compete for low-cost debt funding with Fannie Mae, the FHLBs, and other institutions. Competition for debt
funding from these entities can vary with changes in economic, financial market, and regulatory environments. Increased
competition for low-cost debt funding may result in a higher cost to finance our business, which could negatively affect
our financial results. An inability to issue debt securities at attractive rates in amounts sufficient to fund our business
activities and meet our obligations could have an adverse effect on our business, liquidity, financial condition, and results
of operations. See “MD&A — LIQUIDITY AND CAPITAL RESOURCES — Liquidity — Other Debt Securities” for a
description of our debt issuance programs.
     Our funding costs may also be affected by changes in the amount of, and demand for, debt issued by Treasury.

Line of Credit
     We maintain a secured intraday line of credit to provide additional intraday liquidity to fund our activities through
the Fedwire system. This line of credit requires us to post collateral to a third party. In certain circumstances, this secured
counterparty may be able to repledge the collateral underlying our financing without our consent. In addition, because the
secured intraday line of credit is uncommitted, we may not be able to continue to draw on it if and when needed.

Any downgrade in the credit ratings of the U.S. government would likely be followed by a downgrade in our credit
ratings. A downgrade in the credit ratings of our debt could adversely affect our liquidity and other aspects of our
business.
     Nationally recognized statistical rating organizations play an important role in determining, by means of the ratings
they assign to issuers and their debt, the availability and cost of funding. Our credit ratings are important to our liquidity.
We currently receive ratings from three nationally recognized statistical rating organizations (S&P, Moody’s, and Fitch)
for our unsecured borrowings. These ratings are primarily based on the support we receive from Treasury, and therefore
are affected by changes in the credit ratings of the U.S. government.
                                                               63                                                  Freddie Mac
     On August 2, 2011, President Obama signed the “Budget and Control Act of 2011” which raised the
U.S. government’s statutory debt limit. The raising of the statutory debt limit and details outlined in the legislation to
reduce the deficit resulted in actions on the ratings of the U.S. government and our debt, including: (a) on August 5, 2011,
S&P lowered the long-term credit rating of the United States to “AA+” from “AAA” and assigned a negative outlook to
the rating; and (b) on August 8, 2011, S&P lowered our senior long-term debt credit rating to “AA+” from “AAA” and
assigned a negative outlook to the rating. As a result of this downgrade, we posted additional collateral to certain
derivative counterparties in accordance with the terms of the collateral agreements with such counterparties. For more
information, see “MD&A — LIQUIDITY AND CAPITAL RESOURCES — Liquidity — Credit Ratings.”
     S&P, Moody’s, and Fitch have indicated that additional actions on the U.S. government’s ratings could occur if steps
toward a credible deficit reduction plan are not taken or if the U.S. experiences a weaker than expected economic
recovery. Any downgrade in the credit ratings of the U.S. government would be expected to be followed or accompanied
by a downgrade in our credit ratings.
      In addition to a downgrade in the credit ratings of or outlook on the U.S. government, a number of events could
adversely affect our debt credit ratings, including actions by governmental entities or others, changes in government
support for us, additional GAAP losses, and additional draws under the Purchase Agreement. Such actions could lead to
major disruptions in the mortgage market and to our business due to lower liquidity, higher borrowing costs, lower asset
values, and higher credit losses, and could cause us to experience much greater net losses and net worth deficits. The full
range and extent of the adverse effects to our business that would result from any such ratings downgrades and market
disruptions cannot be predicted with certainty. However, we expect that they could: (a) adversely affect our liquidity and
cause us to limit or suspend new business activities that entail outlays of cash; (b) make new issuances of debt
significantly more costly, or potentially prohibitively expensive, and adversely affect the supply of debt financing available
to us; (c) reduce the value of our guarantee to investors and adversely affect our ability to issue our guaranteed mortgage-
related securities; (d) reduce the value of Treasury and agency mortgage securities we hold; (e) increase the cost of
mortgage financing for borrowers, thereby reducing the supply of mortgages available to us to purchase; (f) adversely
affect home prices, reducing the value of our REO and likely leading to additional borrower defaults on mortgage loans
we guarantee; and (g) trigger additional collateral requirements under our derivatives contracts.

Any decline in the price performance of or demand for our PCs could have an adverse effect on the volume and
profitability of our new single-family guarantee business.
     Our PCs are an integral part of our mortgage purchase program. We purchase many mortgages by issuing PCs in
exchange for them in guarantor swap transactions. We also issue PCs backed by mortgage loans that we purchased for
cash. Our competitiveness in purchasing single-family mortgages from our seller/servicers, and thus the volume and
profitability of new single-family business, can be directly affected by the relative price performance of our PCs and
comparable Fannie Mae securities. Increasing demand for our PCs helps support the price performance of our PCs, which
in turn helps us compete with Fannie Mae and others in purchasing mortgages.
     Our PCs have typically traded at a discount to comparable Fannie Mae securities, which creates an incentive for
customers to conduct a disproportionate share of their guarantor business with Fannie Mae and negatively impacts the
economics of our business. Various factors, including market conditions and the relative rates at which the underlying
mortgages prepay, affect the price performance of our PCs. The changes to HARP (announced by FHFA on October 24,
2011) could adversely affect the price performance of our PCs, to the extent they cause the loans underlying our PCs to
refinance at a faster rate than loans underlying comparable Fannie Mae securities (or cause the perception that loans
underlying our PCs will refinance at a faster rate). While we employ a variety of strategies to support the price
performance of our PCs and may consider further strategies, any such strategies may fail or adversely affect our business
or we may cease such activities if deemed appropriate. We may incur costs to support the liquidity and price performance
of our securities. In certain circumstances, we compensate customers for the difference in price between our PCs and
comparable Fannie Mae securities. However, this could adversely affect the profitability and market share of our single-
family guarantee business.
      Beginning in 2012, under guidance from FHFA we expect to curtail mortgage-related investments portfolio purchase
and retention activities that are undertaken for the primary purpose of supporting the price performance of our PCs, which
may result in a significant decline in the market share of our single-family guarantee business, lower comprehensive
income, and a more rapid decline in the size of our total mortgage portfolio. If these developments occur, it may be
difficult and expensive for us to reverse or mitigate them through PC price support activities, should we desire or be
directed to do so. For more information, see “BUSINESS — Our Business Segments — Single-Family Guarantee
Segment — Securitization Activities” and “— Investments Segment — PC Support Activities.”
                                                             64                                                  Freddie Mac
     We may be unable to maintain a liquid and deep market for our PCs, which could also adversely affect the price
performance of PCs. A significant reduction in the volume of mortgage loans that we securitize could reduce the liquidity
of our PCs.

Mortgage fraud could result in significant financial losses and harm to our reputation.
     We rely on representations and warranties by seller/servicers about the characteristics of the single-family mortgage
loans we purchase and securitize, and we do not independently verify most of the information that is provided to us
before we purchase the loan. This exposes us to the risk that one or more of the parties involved in a transaction (such as
the borrower, seller, broker, appraiser, title agent, loan officer, lender or servicer) will engage in fraud by misrepresenting
facts about a mortgage loan or a borrower. While we subsequently review a sample of these loans to determine if such
loans are in compliance with our contractual standards, there can be no assurance that this would detect or deter mortgage
fraud, or otherwise reduce our exposure to the risk of fraud. We are also exposed to fraud by third parties in the mortgage
servicing function, particularly with respect to sales of REO properties, single-family short sales, and other dispositions of
non-performing assets. We may experience significant financial losses and reputational damage as a result of such fraud.

The value of mortgage-related securities guaranteed by us and held as investments may decline if we were unable to
perform under our guarantee or if investor confidence in our ability to perform under our guarantee were to diminish.
      A portion of our investments in mortgage-related securities are securities guaranteed by us. Our valuation of these
securities is consistent with GAAP and the legal structure of the guarantee transaction. These securities include the
Freddie Mac assets transferred to the securitization trusts that serve as collateral for the mortgage-related securities issued
by the trusts (i.e., (a) multifamily PCs; (b) REMICs and Other Structured Securities; and (c) certain Other Guarantee
Transactions). The valuation of our guaranteed mortgage-related securities necessarily reflects investor confidence in our
ability to perform under our guarantee and the liquidity that our guarantee provides. If we were unable to perform under
our guarantee or if investor confidence in our ability to perform under our guarantee were to diminish, the value of our
guaranteed securities may decline, thereby reducing the value of the securities reported on our consolidated balance
sheets, which could have an adverse affect on our financial condition and results of operations. This could also adversely
affect our ability to sell or otherwise use these securities for liquidity purposes.

Changes in interest rates could negatively impact our results of operations, stockholders’ equity (deficit) and fair value
of net assets.
     Our investment activities and credit guarantee activities expose us to interest rate and other market risks. Changes in
interest rates, up or down, could adversely affect our net interest yield. Although the yield we earn on our assets and our
funding costs tend to move in the same direction in response to changes in interest rates, either can rise or fall faster than
the other, causing our net interest yield to expand or compress. For example, due to the timing of maturities or rate reset
dates on variable-rate instruments, when interest rates rise, our funding costs may rise faster than the yield we earn on our
assets. This rate change could cause our net interest yield to compress until the effect of the increase is fully reflected in
asset yields. Changes in the slope of the yield curve could also reduce our net interest yield.
      Our GAAP results can be significantly affected by changes in interest rates, and adverse changes in interest rates
could increase our GAAP net loss or deficit in total equity (deficit) materially. For example, changes in interest rates
affect the fair value of our derivative portfolio. Since we generally record changes in fair values of our derivatives in
current income, such changes could significantly impact our GAAP results. While derivatives are an important aspect of
our management of interest-rate risk, they generally increase the volatility of reported net income (loss), because, while
fair value changes in derivatives affect net income, fair value changes in several of the types of assets and liabilities being
hedged do not affect net income. We could record substantial gains or losses from derivatives in any period, which could
significantly contribute to our overall results for the period and affect our net equity (deficit) as of the end of such period.
It is difficult for us to predict the amount or direction of derivative results. Additionally, increases in interest rates could
increase other-than-temporary impairments on our investments in non-agency mortgage-related securities.
      Changes in interest rates may also affect prepayment assumptions, thus potentially impacting the fair value of our
assets, including our investments in mortgage-related assets. When interest rates fall, borrowers are more likely to prepay
their mortgage loans by refinancing them at a lower rate. An increased likelihood of prepayment on the mortgages
underlying our mortgage-related securities may adversely impact the value of these securities.
     When interest rates increase, our credit losses from ARM and interest-only ARM loans may increase as borrower
payments increase at their reset dates, which increases the borrower’s risk of default. Rising interest rates may also reduce
the opportunity for these borrowers to refinance into a fixed-rate loan.
                                                               65                                                  Freddie Mac
     Interest rates can fluctuate for a number of reasons, including changes in the fiscal and monetary policies of the
federal government and its agencies, such as the Federal Reserve. Federal Reserve policies directly and indirectly
influence the yield on our interest-earning assets and the cost of our interest-bearing liabilities. The availability of
derivative financial instruments (such as options and interest rate and foreign currency swaps) from acceptable
counterparties of the types and in the quantities needed could also affect our ability to effectively manage the risks related
to our investment funding. Our strategies and efforts to manage our exposures to these risks may not be effective. In
particular, in recent periods, a number of factors have made it more difficult for us to estimate future prepayments,
including uncertainty regarding default rates, unemployment, loan modifications, the impact of FHFA-directed changes to
HARP (announced in October 2011), and the volatility and impact of home price movements on mortgage durations. This
could make it more difficult for us to manage prepayment risk, and could cause our hedging-related losses to increase.
See “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK” for a description of the types
of market risks to which we are exposed and how we seek to manage those risks.

Changes in OAS could materially impact our fair value of net assets and affect future results of operations and
stockholders’ equity (deficit).
      OAS is an estimate of the incremental yield spread between a given security and an agency debt yield curve. This
includes consideration of potential variability in the security’s cash flows resulting from any options embedded in the
security, such as prepayment options. The OAS between the mortgage and agency debt sectors can significantly affect the
fair value of our net assets. The fair value impact of changes in OAS for a given period represents an estimate of the net
unrealized increase or decrease in the fair value of net assets arising from net fluctuations in OAS during that period. We
do not attempt to hedge or actively manage the impact of changes in mortgage-to-debt OAS.
     Changes in market conditions, including changes in interest rates or liquidity, may cause fluctuations in OAS. A
widening of the OAS on a given asset, which typically causes a decline in the current fair value of that asset, may cause
significant mark-to-fair value losses, and may adversely affect our financial results and stockholders’ equity (deficit), but
may increase the number of attractive investment opportunities in mortgage loans and mortgage-related securities.
Conversely, a narrowing or tightening of the OAS typically causes an increase in the current fair value of that asset, but
may reduce the number of attractive investment opportunities in mortgage loans and mortgage-related securities.
Consequently, a tightening of the OAS may adversely affect our future financial results and stockholders’ equity (deficit).
See “MD&A — FAIR VALUE MEASUREMENTS AND ANALYSIS — Consolidated Fair Value Balance Sheets
Analysis — Discussion of Fair Value Results” for a more detailed description of the impacts of changes in mortgage-to-
debt OAS.
     While wider spreads might create favorable investment opportunities, we are limited in our ability to take advantage
of any such opportunities due to various restrictions on our mortgage-related investments portfolio activities. See
“BUSINESS — Conservatorship and Related Matters — Impact of Conservatorship and Related Actions on Our Business
— Limits on Investment Activity and Our Mortgage-Related Investments Portfolio.”

We could experience significant reputational harm, which could affect the future of our company, if our efforts under
the MHA Program and other initiatives to support the U.S. residential mortgage market do not succeed.
     We are focused on the servicing alignment initiative, the MHA Program and other initiatives to support the
U.S. residential mortgage market. If these initiatives do not achieve their desired results, or are otherwise perceived to
have failed to achieve their objectives, we may experience damage to our reputation, which may impact the extent of
future government support for our business and government decisions with respect to the future status and role of Freddie
Mac.

Negative publicity causing damage to our reputation could adversely affect our business prospects, financial results, or
net worth.
     Reputation risk, or the risk to our financial results and net worth from negative public opinion, is inherent in our
business. Negative public opinion could adversely affect our ability to keep and attract customers or otherwise impair our
customer relationships, adversely affect our ability to obtain financing, impede our ability to hire and retain qualified
personnel, hinder our business prospects, or adversely impact the trading price of our securities. Perceptions regarding the
practices of our competitors, our seller/servicers or the financial services and mortgage industries as a whole, particularly
as they relate to the current housing and economic downturn, may also adversely impact our reputation. Adverse
reputation impacts on third parties with whom we have important relationships may impair market confidence or investor
confidence in our business operations as well. In addition, negative publicity could expose us to adverse legal and
regulatory consequences, including greater regulatory scrutiny or adverse regulatory or legislative changes, and could
                                                              66                                                 Freddie Mac
affect what changes may occur to our business structure during or following conservatorship, including whether we will
continue to exist. These adverse consequences could result from perceptions concerning our activities and role in
addressing the housing and economic downturn, concern about our compensation practices, concerns about deficiencies in
foreclosure documentation practices or our actual or alleged action or failure to act in any number of areas, including
corporate governance, regulatory compliance, financial reporting and disclosure, purchases of products perceived to be
predatory, safeguarding or using nonpublic personal information, or from actions taken by government regulators in
response to our actual or alleged conduct.

The servicing alignment initiative, MHA Program, and other efforts to reduce foreclosures, modify loan terms and
refinance mortgages, including HARP, may fail to mitigate our credit losses and may adversely affect our results of
operations or financial condition.
      The servicing alignment initiative, MHA Program, and other loss mitigation activities are a key component of our
strategy for managing and resolving troubled assets and lowering credit losses. However, there can be no assurance that
any of our loss mitigation strategies will be successful and that credit losses will not continue to escalate. The costs we
incur related to loan modifications and other activities have been, and will likely continue to be, significant because we
bear the full cost of the monthly payment reductions related to modifications of loans we own or guarantee, and all
applicable servicer and borrower incentives. We are not reimbursed for these costs by Treasury. For information on our
loss mitigation activities, see “MD&A — RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-
Family Loan Workouts and the MHA Program.”
     We could be required or elect to make changes to our implementation of our other loss mitigation activities that
could make these activities more costly to us, both in terms of credit expenses and the cost of implementing and operating
the activities. For example, we could be required to, or elect to, use principal reduction to achieve reduced payments for
borrowers. This could further increase our losses, as we could bear the full costs of such reductions.
     A significant number of loans are in the trial period of HAMP or the trial period of our new non-HAMP standard
loan modification. For information on completion rates for HAMP and non-HAMP modifications, see “MD&A — RISK
MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program.” A
number of loans will fail to complete the applicable trial period or qualify for our other loss mitigation programs. For
these loans, the trial period will have effectively delayed the foreclosure process and could increase our losses, to the
extent the prices we ultimately receive for the foreclosed properties are less than the prices we could have received had
we foreclosed upon the properties earlier, due to continued home price declines. These delays in foreclosure could also
cause our REO operations expense to increase, perhaps substantially.
     Mortgage modification initiatives, particularly any future focus on principal reductions (which at present we do not
offer to borrowers), have the potential to change borrower behavior and mortgage underwriting. Principal reductions may
create an incentive for borrowers that are current to become delinquent in order to receive a principal reduction. This,
coupled with the phenomenon of widespread underwater mortgages, could significantly affect borrower attitudes towards
homeownership, the commitment of borrowers to making their mortgage payments, the way the market values residential
mortgage assets, the way in which we conduct business and, ultimately, our financial results.
     Depending on the type of loss mitigation activities we pursue, those activities could result in accelerating or slowing
prepayments on our PCs and REMICs and Other Structured Securities, either of which could affect the pricing of such
securities.
      On October 24, 2011, FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to HARP
in an effort to attract more eligible borrowers whose monthly payments are current and who can benefit from refinancing
their home mortgages. The Acting Director of FHFA stated that the goal of pursuing these changes is to create refinancing
opportunities for more borrowers whose mortgages are owned or guaranteed by Freddie Mac and Fannie Mae, while
reducing risk for Freddie Mac and Fannie Mae and bringing a measure of stability to housing markets. However, there can
be no assurance that the revisions to HARP will be successful in achieving these objectives or that any benefits from the
revised program will exceed our costs. We may face greater exposure to credit and other losses on these HARP loans
because we are not requiring lenders to provide us with certain representations and warranties on these HARP loans. In
addition, changes in expectations of mortgage prepayments could result in declines in the fair value of our investments in
certain agency securities and lower net interest yields over time on other mortgage-related investments. The ultimate
impact of the HARP revisions on our financial results will be driven by the level of borrower participation and the volume
of loans with high LTV ratios that we acquire under the program. Over time, relief refinance mortgages with LTV ratios
above 80% may not perform as well as relief refinance mortgages with LTV ratios of 80% and below because of the
continued high LTV ratios of these loans. There is an increase in borrower default risk as LTV ratios increase, particularly
                                                             67                                                  Freddie Mac
for loans with LTV ratios above 80%. In addition, relief refinance mortgages may not be covered by mortgage insurance
for the full excess of their UPB over 80%.
     We are devoting significant internal resources to the implementation of the servicing alignment initiative and the
MHA Program, which has, and will continue to, increase our expenses. The size and scope of these efforts may also limit
our ability to pursue other business opportunities or corporate initiatives.

We may experience further write-downs and losses relating to our assets, including our investment securities, net
deferred tax assets, REO properties or mortgage loans, that could materially adversely affect our business, results of
operations, financial condition, liquidity and net worth.
     We experienced significant losses and write-downs relating to certain of our assets during the past several years,
including significant declines in market value, impairments of our investment securities, market-based write-downs of
REO properties, losses on non-performing loans removed from PC pools, and impairments on other assets. The fair value
of our assets may be further adversely affected by continued weakness in the economy, further deterioration in the
housing and financial markets, additional ratings downgrades, or other events.
     We increased our valuation allowance for our net deferred tax assets by $2.3 billion during 2011. The future status
and role of Freddie Mac could be affected by actions of the Conservator, and legislative and regulatory action that alters
the ownership, structure, and mission of the company. The uncertainty of these developments could materially affect our
operations, which could in turn affect our ability or intent to hold investments until the recovery of any temporary
unrealized losses. If future events significantly alter our current outlook, a valuation allowance may need to be established
for the remaining deferred tax asset.
     Due to the ongoing weaknesses in the economy and in the housing and financial markets, we may experience
additional write-downs and losses relating to our assets, including those that are currently AAA-rated, and the fair values
of our assets may continue to decline. This could adversely affect our results of operations, financial condition, liquidity,
and net worth.

There may not be an active, liquid trading market for our equity securities. Our equity securities are not likely to have
any value beyond the short-term.
      Our common stock and classes of preferred stock that previously were listed and traded on the NYSE were delisted
from the NYSE effective July 8, 2010, and now trade on the OTC market. The market price of our common stock
declined significantly between June 16, 2010, the date we announced our intention to delist these securities, and July 8,
2010, the first day the common stock traded exclusively on the OTC market, and may decline further. Trading volumes on
the OTC market have been, and will likely continue to be, less than those on the NYSE, which would make it more
difficult for investors to execute transactions in our securities and could make the prices of our securities decline or be
more volatile. The Acting Director of FHFA has stated that “[Freddie Mac and Fannie Mae’s] equity holders retain an
economic claim on the companies but that claim is subordinate to taxpayer claims. As a practical matter, taxpayers are not
likely to be repaid in full, so [Freddie Mac and Fannie Mae] stock lower in priority is not likely to have any value.”

Operational Risks
We have incurred, and will continue to incur, expenses and we may otherwise be adversely affected by delays and
deficiencies in the foreclosure process.
     We have been, and will likely continue to be, adversely affected by delays in the foreclosure process, which could
increase our expenses.
     The average length of time for foreclosure of a Freddie Mac loan significantly increased in recent years, and may
continue to increase. A number of factors have contributed to this increase, including: (a) the increasingly lengthy
foreclosure process in many states; and (b) concerns about deficiencies in seller/servicers’ conduct of the foreclosure
process. More recently, regulatory developments impacting mortgage servicing and foreclosure practices have also
contributed to these delays. For more information on these developments, see “BUSINESS — Regulation and
Supervision — Legislative and Regulatory Developments — Developments Concerning Single-Family Servicing Practices.”
     Delays in the foreclosure process could cause our credit losses to increase for a number of reasons. For example,
properties awaiting foreclosure could deteriorate until we acquire ownership of them through foreclosure. This would
increase our expenses to repair and maintain the properties when we do acquire them. Such delays may also adversely
affect the values of, and our losses on, the non-agency mortgage-related securities we hold. Delays in the foreclosure
                                                              68                                                 Freddie Mac
process may also adversely affect trends in home prices regionally or nationally, which could also adversely affect our
financial results.
     It also is possible that mortgage insurance claims could be reduced if delays caused by servicers’ deficient
foreclosure practices prevent servicers from completing foreclosures within required timelines defined by mortgage
insurers. Mortgage insurance companies establish foreclosure timelines that vary by state and range between 30 and
960 days.
      Delays in the foreclosure process could create fluctuations in our single-family credit statistics. For example, our
realization of credit losses, which consists of REO operations income (expense) plus charge-offs, net, could be delayed
because we typically record charge-offs at the time we take ownership of a property through foreclosure. Delays could
also temporarily increase the number of seriously delinquent loans that remain in our single-family mortgage portfolio,
which could result in higher reported serious delinquency rates and a larger number of non-performing loans than would
otherwise have been the case.
     In the fall of 2010, several large seller/servicers announced issues relating to the improper preparation and execution
of certain documents used in foreclosure proceedings. These announcements raised various concerns relating to
foreclosure practices. A number of our seller/servicers, including several of our largest ones, temporarily suspended
foreclosure proceedings in certain states while they evaluated and addressed these issues. While the larger servicers
generally resumed foreclosure proceedings in early 2011, single-family mortgages in our portfolio have continued to
experience significant delays in the foreclosure process in 2011, as compared to periods before these issues arose,
particularly in states that require a judicial foreclosure process. These and other factors could also delay sales of our REO
properties. In addition, a group consisting of state attorneys general and state bank and mortgage regulators is reviewing
foreclosure practices. We have terminated the eligibility of several law firms to serve as counsel in foreclosures of Freddie
Mac mortgages, due to issues with respect to the firms’ foreclosure practices. It is possible that additional deficiencies in
foreclosure practices will be identified.
     We have incurred, and will continue to incur, expenses related to deficiencies in foreclosure documentation practices
and the costs of remediating them, which may be significant. These expenses include costs related to terminating the
eligibility of certain law firms and other incremental costs. We may also incur costs if we become involved in litigation or
investigations relating to these issues. It will take time for seller/servicers to complete their evaluations of these issues and
implement remedial actions. The integrity of the foreclosure process is critical to our business, and our financial results
could be adversely affected by deficiencies in the conduct of that process.

Issues related to mortgages recorded through the MERS System could delay or disrupt foreclosure activities and have
an adverse effect on our business.
      The Mortgage Electronic Registration System, or the MERS» System, is an electronic registry that is widely used by
seller/servicers, Freddie Mac, and other participants in the mortgage finance industry, to maintain records of beneficial
ownership of mortgages. The MERS System is maintained by MERSCORP, Inc., a privately held company, the
shareholders of which include a number of organizations in the mortgage industry, including Freddie Mac, Fannie Mae,
and certain seller/servicers, mortgage insurance companies, and title insurance companies.
      Mortgage Electronic Registration Systems, Inc., or MERS, a wholly-owned subsidiary of MERSCORP, Inc., has the
ability to serve as a nominee for the owner of a mortgage loan and in that role become the mortgagee of record for the
loan in local land records. Freddie Mac seller/servicers may choose to use MERS as a nominee. Approximately 42% of
the loans Freddie Mac owns or guarantees were registered in MERS’ name as of December 31, 2011; the beneficial
ownership and the ownership of the servicing rights related to those loans are tracked in the MERS System.
     In the past, Freddie Mac servicers had the option of initiating foreclosure in MERS’ name. On March 23, 2011, we
informed our servicers that they no longer may initiate foreclosures in MERS’ name for those mortgages owned or
guaranteed by us and registered with MERS that are referred to foreclosure on or after April 1, 2011. As of April 1, 2011,
foreclosure of mortgages owned or guaranteed by us for which MERS serves as nominee is accomplished by MERS
assigning the record ownership of the mortgage to the servicer, and the servicer initiating foreclosure in its own name.
Many of our servicers were following this procedure before the March 23 announcement.
      MERS has also been the subject of numerous lawsuits challenging foreclosures on mortgages for which MERS is
mortgagee of record as nominee for the beneficial owner. For example, on February 3, 2012, the Attorney General of the
State of New York filed a lawsuit against MERSCORP, Inc., MERS and several large banks alleging, among other items,
that the creation and use of the MERS System has resulted in a wide range of deceptive and fraudulent foreclosure filings
in New York state and federal courts. It is possible that adverse judicial decisions, regulatory proceedings or action, or
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legislative action related to MERS, could delay or disrupt foreclosure of mortgages that are registered on the MERS
System. Publicity concerning regulatory or judicial decisions, even if such decisions were not adverse, or MERS-related
concerns about the integrity of the assignment process, could adversely affect the mortgage industry and negatively impact
public confidence in the foreclosure process, which could lead to legislative or regulatory action. Because MERS often
executes legal documents in connection with foreclosure proceedings, it is possible that investigations by governmental
authorities and others into deficiencies in foreclosure practices may negatively impact MERS and the MERS System.
     Federal or state legislation or regulatory action could prevent us from using the MERS System for mortgages that we
currently own, guarantee, and securitize and for mortgages acquired in the future, or could create additional requirements
for the transfer of mortgages that could affect the process for and costs of acquiring, transferring, servicing, and
foreclosing mortgages. Such legislation or regulatory action could increase our costs or otherwise adversely affect our
business. For example, we could be required to transfer mortgages out of the MERS System. There is also uncertainty
regarding the extent to which seller/servicers will choose to use the MERS System in the future.
     Failures by MERS to apply prudent and effective process controls and to comply with legal and other requirements
in the foreclosure process could pose legal and operational risks for us. We may also face significant reputational risk due
to our ties to MERS, as we are a shareholder of MERSCORP, Inc., and a Freddie Mac officer serves on the board of
directors of both entities.
     We cannot predict the impact that such events or actions may have on our business. On April 13, 2011, the Office of
the Comptroller of the Currency, the Federal Reserve, the FDIC, the Office of Thrift Supervision, and FHFA entered into
a consent order with MERS and MERSCORP, Inc., which stated that such federal regulators had identified certain
deficiencies and unsafe or unsound practices by MERS and MERSCORP, Inc. that present financial, operational,
compliance, legal, and reputational risks to MERSCORP, Inc. and MERS, and to its participating members, including
Freddie Mac. The consent order requires MERS and MERSCORP, Inc. to, among other things, create and submit plans to
ensure that MERS and MERSCORP, Inc. (a): are operated in a safe and sound manner and have adequate financial
strength and staff; (b) improve communications with MERSCORP, Inc. shareholders and members; (c) intensify the
monitoring of and response to litigation; and (d) establish processes to ensure data quality and strengthen certain aspects
of corporate governance. The federal banking regulators have also indicated that MERSCORP, Inc. should take action to
simplify its governance structure, which could involve us giving up certain governance rights. It is unclear what changes
will ultimately be made and whether there will be any consequent impact on Freddie Mac’s relationship with and rights
with respect to the two entities.

Weaknesses in internal control over financial reporting and in disclosure controls could result in errors and inadequate
disclosures, affect operating results, and cause investors to lose confidence in our reported results.
     We face continuing challenges because of deficiencies in our controls. Control deficiencies could result in errors, and
lead to inadequate or untimely disclosures, and affect operating results. Control deficiencies could also cause investors to
lose confidence in our reported financial results, which may have an adverse effect on the trading price of our securities.
For information about our ineffective disclosure controls and two material weaknesses in internal control over financial
reporting, see “CONTROLS AND PROCEDURES.”
     There are a number of factors that may impede our efforts to establish and maintain effective disclosure controls and
internal control over financial reporting, including: (a) the nature of the conservatorship and our relationship with FHFA;
(b) the complexity of, and significant changes in, our business activities and related GAAP requirements; (c) significant
employee and management turnover; (d) internal reorganizations; (e) uncertainty regarding the sustainability of newly
established controls; (f) data quality or servicing-related issues; and (g) the uncertain impacts of the ongoing housing and
economic downturn on the results of our models, which are used for financial accounting and reporting purposes.
Disruptive levels of employee turnover could negatively impact our internal control environment, including internal
control over financial reporting, and ability to issue timely financial statements. During 2011, we experienced significant
changes to our internal control environment as a result of resignations, terminations, or changes in responsibility. We
cannot be certain that our efforts to improve and maintain our internal control over financial reporting will ultimately be
successful.
     Effectively designed and operated internal control over financial reporting provides only reasonable assurance that
material errors in our financial statements will be prevented or detected on a timely basis. A failure to maintain effective
internal control over financial reporting increases the risk of a material error in our reported financial results and delay in
our financial reporting timeline. Depending on the nature of a control failure and any required remediation, ineffective
controls could have a material adverse effect on our business.
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We face risks and uncertainties associated with the internal models that we use for financial accounting and reporting
purposes, to make business decisions, and to manage risks. Market conditions have raised these risks and uncertainties.
     We make significant use of business and financial models for financial accounting and reporting purposes and to
manage risk. We face risk associated with our use of models. First, there is inherent uncertainty associated with model
results. Second, we could fail to properly implement, operate, or use our models. Either of these situations could
adversely affect our financial statements and our ability to manage risks.
     We use market-based information as inputs to our models. However, it can take time for data providers to prepare
information, and thus the most recent information may not be available for the preparation of our financial statements.
When market conditions change quickly and in unforeseen ways, there is an increased risk that the inputs reflected in our
models are not representative of current market conditions.
     The severe deterioration of the housing and credit markets beginning several years ago and, more recently, the
extended period of economic weakness and uncertainty has increased the risks associated with our use of models. For
example, certain economic events or the implementation of government policies could create increased model uncertainty
as models may not fully capture these events, which makes it more difficult to assess model performance and requires a
higher degree of management judgment. Our models may not perform as well in situations for which there are few or no
recent historical precedents. We have adjusted our models in response to recent events, but there remains considerable
uncertainty about model results.
     Models are inherently imperfect predictors of actual results. Our models rely on various assumptions that may be
incorrect, including that historical experience can be used to predict future results. It has been more difficult to predict the
behaviors of the housing and credit capital markets and market participants over the past several years, due to, among
other factors: (a) the uncertainty concerning trends in home prices; (b) the lack of historical evidence about the behavior
of deeply underwater borrowers, the effect of an extended period of extremely low interest rates on prepayments, and the
impact of widespread loan refinancing and modification programs (such as HARP and HAMP), including the potential for
the extensive use of principal reductions; and (c) the impact of the concerns about deficiencies in foreclosure
documentation practices and related delays in the foreclosure process.
     We face the risk that we could fail to implement, operate, or adjust or use our models properly. This risk may be
increasing due to our difficulty in attracting and retaining employees with the necessary experience and skills. For
example, the assumptions underlying a model could be invalid, or we could apply a model to events or products outside
the model’s intended use. We may fail to code a model correctly or we could use incorrect data. The complexity and
interconnectivity of our models create additional risk regarding the accuracy of model output. While we have processes
and controls in place designed to mitigate these risks, there can be no assurances that such processes and controls will be
successful.
     Management often needs to exercise judgment to interpret or adjust modeled results to take into account new
information or changes in conditions. The dramatic changes in the housing and credit capital markets in recent years have
required frequent adjustments to our models and the application of greater management judgment in the interpretation and
adjustment of the results produced by our models. This further increases both the uncertainty about model results and the
risk of errors in the implementation, operation, or use of the models.
     We face the risk that the valuations, risk metrics, amortization results, loan loss reserve estimations, and security
impairment charges produced by our internal models may be different from actual results, which could adversely affect
our business results, cash flows, fair value of net assets, business prospects, and future financial results. For example, our
models may under-predict the losses we will suffer in various aspects of our business. Changes in, or replacements of, any
of our models or in any of the assumptions, judgments, or estimates used in the models may cause the results generated
by the model to be materially different from those generated by the prior model. The different results could cause a
revision of previously reported financial condition or results of operations, depending on when the change to the model,
assumption, judgment, or estimate is implemented. Any such changes may also cause difficulties in comparisons of the
financial condition or results of operations of prior or future periods.
     Due to increased uncertainty about model results, we also face increased risk that we could make poor business
decisions in areas where model results are an important factor, including loan purchases, management and guarantee fee
pricing, asset and liability management, market risk management, and quality-control sampling strategies for loans in our
single-family credit guarantee portfolio. Furthermore, any strategies we employ to attempt to manage the risks associated
with our use of models may not be effective. See “MD&A — CRITICAL ACCOUNTING POLICIES AND
ESTIMATES” and “QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK — Interest-Rate
Risk and Other Market Risks” for more information on our use of models.
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Changes in our accounting policies, as well as estimates we make, could materially affect how we report our financial
condition or results of operations.
     Our accounting policies are fundamental to understanding our financial condition and results of operations. Certain of
our accounting policies, as well as estimates we make, are “critical,” as they are both important to the presentation of our
financial condition and results of operations and they require management to make particularly difficult, complex or
subjective judgments and estimates, often regarding matters that are inherently uncertain. Actual results could differ from
our estimates and the use of different judgments and assumptions related to these policies and estimates could have a
material impact on our consolidated financial statements. For a description of our critical accounting policies, see
“MD&A — CRITICAL ACCOUNTING POLICIES AND ESTIMATES.”
     From time to time, the FASB and the SEC change the financial accounting and reporting guidance that govern the
preparation of our financial statements. These changes are beyond our control, can be difficult to predict and could
materially impact how we report our financial condition and results of operations. We could be required to apply new or
revised guidance retrospectively, which may result in the revision of prior period financial statements by material
amounts. The implementation of new or revised accounting guidance could result in material adverse effects to our
stockholders’ equity (deficit) and result in or contribute to the need for additional draws under the Purchase Agreement.
     FHFA may require us to change our accounting policies to align more closely with those of Fannie Mae. FHFA may
also require us and Fannie Mae to have the same independent public accounting firm. Either of these events could
significantly increase our expenses and require a substantial time commitment of management.
     See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for more information.

A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our
business, damage our reputation, and cause losses.
     Shortcomings or failures in our internal processes, people, or systems could lead to impairment of our liquidity,
financial loss, errors in our financial statements, disruption of our business, liability to customers, further legislative or
regulatory intervention, or reputational damage. Servicing and loss mitigation processes are currently under considerable
stress, which increases the risk that we may experience further operational problems in the future. Our core systems and
technical architecture include many legacy systems and applications that lack scalability and flexibility, which increases
the risk of system failure. While we are working to enhance the quality of our infrastructure, we have had difficulty in the
past conducting large-scale infrastructure improvement projects.
     Our business is highly dependent on our ability to process a large number of transactions on a daily basis and
manage and analyze significant amounts of information, much of which is provided by third parties. The transactions we
process are complex and are subject to various legal, accounting, and regulatory standards. The types of transactions we
process and the standards relating to those transactions can change rapidly in response to external events, such as the
implementation of government-mandated programs and changes in market conditions. Our financial, accounting, data
processing, or other operating systems and facilities may fail to operate properly or become disabled, adversely affecting
our ability to process these transactions. The information provided by third parties may be incorrect, or we may fail to
properly manage or analyze it. The inability of our systems to accommodate an increasing volume of transactions or new
types of transactions or products could constrain our ability to pursue new business initiatives or change or improve
existing business activities.
     Our employees could act improperly for their own gain and cause unexpected losses or reputational damage. While
we have processes and systems in place designed to prevent and detect fraud, there can be no assurance that such
processes and systems will be successful.
      We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearinghouses, or
other financial intermediaries we use to facilitate our securities and derivatives transactions. Any such failure or
termination could adversely affect our ability to effect transactions, service our customers, and manage our exposure to
risk.
     Most of our key business activities are conducted in our principal offices located in McLean, Virginia and represent a
concentrated risk of people, technology, and facilities. Despite the contingency plans and local recovery facilities we have
in place, our ability to conduct business would be adversely impacted by a disruption in the infrastructure that supports
our business and the geographical area in which we are located. Potential disruptions may include outages or disruptions
to electrical, communications, transportation, or other services we use or that are provided to us. If a disruption occurs
and our employees are unable to occupy our offices or communicate with or travel to other locations, our ability to
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service and interact with our customers or counterparties may deteriorate and we may not be able to successfully
implement contingency plans that allow us to carry out critical business functions at an acceptable level.
     Due to the concentrated risk and inadequate distribution of resources nationally, we are also exposed to the risk that a
catastrophic event, such as a terrorist event or natural disaster, could result in a significant business disruption and an
inability to process transactions through normal business processes. Any measures we take to mitigate this risk may not be
sufficient to respond to the full range of catastrophic events that may occur.
     Freddie Mac management has determined that current business recovery capabilities would not be effective in the
event of a catastrophic regional business event and could result in a significant business disruption and inability to process
transactions through normal business processes. While management has developed a remediation plan to address the
current capability gaps, any measures we take to mitigate this risk may not be sufficient to respond to the full range of
catastrophic events that may occur.

We have experienced significant management changes, internal reorganizations, and turnover of key staff, which could
increase our operational and control risks and have a material adverse effect on our ability to do business and our
results of operations.
     Internal reorganizations, inability to retain key executives and staff members, and our efforts to reduce administrative
expenses may increase the stress on existing processes, leading to operational or control failures and harm to our financial
performance and results of operations. A number of senior officers left the company in 2011, including our Chief
Operating Officer, our Executive Vice President — Single-Family Credit Guarantee, our Executive Vice President —
Investments and Capital Markets and Treasurer, our Executive Vice President — Multifamily, our Senior Vice President —
Operations & Technology, our Executive Vice President — General Counsel & Corporate Secretary, our Executive Vice
President — Chief Credit Officer, and our Senior Vice President — Interim General Counsel & Corporate Secretary. On
October 26, 2011, FHFA announced that our Chief Executive Officer has expressed his desire to step down in 2012. We
also experienced several significant internal reorganizations in 2011 and significant employee turnover.
      The magnitude of these changes and the short time interval in which they have occurred, particularly during the
ongoing housing and economic downturn, add to the risks of operational or control failures, including a failure in the
effective operation of our internal control over financial reporting or our disclosure controls and procedures. Control
failures could result in material adverse effects on our financial condition and results of operations. Disruptive levels of
turnover among both executives and other employees could lead to breakdowns in any of our operations, affect our ability
to execute ongoing business activities, cause delays and disruptions in the implementation of FHFA-directed and other
important business initiatives, delay or disrupt critical technology and other projects, and erode our business, modeling,
internal audit, risk management, information security, financial reporting, legal, compliance, and other capabilities. For
more information, see “MD&A — RISK MANAGEMENT — Operational Risks” and “CONTROLS AND
PROCEDURES.”
     In addition, management attention may be diverted from regular business concerns by these and future
reorganizations and the continuing need to operate under the framework of conservatorship.

We may not be able to protect the security of our systems or the confidentiality of our information from cyber attack
and other unauthorized access, disclosure, and disruption.
     Our operations rely on the secure receipt, processing, storage, and transmission of confidential and other information
in our computer systems and networks and with our business partners. Like many corporations and government entities,
from time to time we have been, and likely will continue to be, the target of cyber attacks. Because the techniques used to
obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not
recognized until launched against a target, and because some techniques involve social engineering attempts addressed to
employees who may have insufficient knowledge to recognize them, we may be unable to anticipate these techniques or
to implement adequate preventative measures. While we have invested significant resources in our information security
program, there is a risk that it could prove to be inadequate to protect our computer systems, software, and networks.
     Our computer systems, software, and networks may be vulnerable to internal or external cyber attack, unauthorized
access, computer viruses or other malicious code, computer denial of service attacks, or other attempts to harm our
systems or misuse our confidential information. Our employees may be vulnerable to social engineering efforts that cause
a breach in our security that otherwise would not exist as a technical matter. If one or more of such events occur, this
potentially could jeopardize or result in the unauthorized disclosure, misuse or corruption of confidential and other
information, including nonpublic personal information and other sensitive business data, processed, stored in, or
transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our
                                                             73                                                  Freddie Mac
operations or the operations of our customers or counterparties. This could result in significant losses or reputational
damage, adversely affect our relationships with our customers and counterparties, and adversely affect our ability to
purchase loans, issue securities or enter into and execute other business transactions. We could also face regulatory action.
Internal or external attackers may seek to steal, corrupt or disclose confidential financial assets, intellectual property, and
other sensitive information. We may be required to expend significant additional resources to modify our protective
measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and
financial losses that are not fully insured.

We rely on third parties for certain important functions, including some that are critical to financial reporting, our
mortgage-related investment activity, and mortgage loan underwriting. Any failures by those vendors could disrupt our
business operations.
      We outsource certain key functions to external parties, including: (a) processing functions for trade capture, market
risk management analytics, and financial instrument valuation; (b) custody and recordkeeping for our mortgage-related
investments; (c) processing functions for mortgage loan underwriting and servicing; (d) certain services we provide to
Treasury in our role as program compliance agent under HAMP; and (e) certain technology infrastructure and operations.
We may enter into other key outsourcing relationships in the future. If one or more of these key external parties were not
able to perform their functions for a period of time, at an acceptable service level, or for increased volumes, our business
operations could be constrained, disrupted, or otherwise negatively impacted. Our use of vendors also exposes us to the
risk of a loss of intellectual property or of confidential information or other harm. We may also be exposed to reputational
harm, to the extent vendors do not conduct their activities under appropriate ethical standards. Financial or operational
difficulties of an outside vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to
provide services to us.

Our risk management efforts may not effectively mitigate the risks we seek to manage.
     We could incur substantial losses and our business operations could be disrupted if we are unable to effectively
identify, manage, monitor and mitigate operational risks, interest rate and other market risks and credit risks related to our
business. Our risk management policies, procedures and techniques may not be sufficient to mitigate the risks we have
identified or to appropriately identify additional risks to which we are subject. See “QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK” and “MD&A — RISK MANAGEMENT” for a discussion of
our approach to managing certain of the risks we face.

Legal and Regulatory Risks
The Dodd-Frank Act and related regulation may adversely affect our business activities and financial results.
     The Dodd-Frank Act, which was signed into law on July 21, 2010, significantly changed the regulation of the
financial services industry and could affect us in substantial and unforeseeable ways and have an adverse effect on our
business, results of operations, financial condition, liquidity, and net worth. For example, the Dodd-Frank Act and related
future regulatory changes could impact the value of assets that we hold, require us to change certain of our business
practices, impose significant additional costs on us, limit the products we offer, require us to increase our regulatory
capital, or make it more difficult for us to retain and recruit management and other employees. We will also face a more
complicated regulatory environment due to the Dodd-Frank Act and related future regulatory changes, which will increase
compliance costs and could divert management attention or other resources. The Dodd-Frank Act and related future
regulatory changes will also significantly affect many aspects of the financial services industry and potentially change the
business practices of our customers and counterparties; it is possible that any such changes could adversely affect our
business and financial results.
       Implementation of the Dodd-Frank Act is being accomplished through numerous rulemakings, many of which are
still in process. The final effects of the legislation will not be known with certainty until these rulemakings are complete.
The Dodd-Frank Act also mandates the preparation of studies of a wide range of issues, which could lead to additional
legislative or regulatory changes. It could be difficult for us to comply with any future regulatory changes in a timely
manner, due to the potential scope and number of such changes, which could limit our operations and expose us to
liability.
     The long-term impact of the Dodd-Frank Act and related future regulatory changes on our business and the financial
services industry will depend on a number of factors that are difficult to predict, including our ability to successfully
implement any changes to our business, changes in consumer behavior, and our competitors’ and customers’ responses to
the Dodd-Frank Act and related future regulatory changes.
                                                              74                                                  Freddie Mac
    Examples of aspects of the Dodd-Frank Act that may significantly affect us include the following:
    • The new Financial Stability Oversight Council could designate Freddie Mac as a non-bank financial company to be
      subject to supervision and regulation by the Federal Reserve. If this occurs, the Federal Reserve will have authority
      to examine Freddie Mac and we may be required to meet more stringent prudential standards than those applicable
      to other non-bank financial companies. New prudential standards could include requirements related to risk-based
      capital and leverage, liquidity, single-counterparty credit limits, overall risk management and risk committees,
      stress tests, and debt-to-equity limits, among other requirements.
    • The Dodd-Frank Act will have a significant impact on the derivatives market. Large derivatives users, which may
      include Freddie Mac, will be subject to extensive new oversight and regulation. These new regulatory standards
      could impose significant additional costs on us related to derivatives transactions and it may become more difficult
      for us to enter into desired hedging transactions with acceptable counterparties on favorable terms.
    • The Dodd-Frank Act will create new standards and requirements related to asset-backed securities, including
      requiring securitizers and potentially originators to retain a portion of the underlying loans’ credit risk. Any such
      new standards and requirements could weaken or remove incentives for financial institutions to sell mortgage loans
      to us.
    • The Dodd-Frank Act and related future regulatory changes could negatively impact the volume of mortgage
      originations, and thus adversely affect the number of mortgages available for us to purchase or guarantee.
    • Under the Dodd-Frank Act, new minimum mortgage underwriting standards will be required for residential
      mortgages, including a requirement that lenders make a reasonable and good faith determination based on “verified
      and documented information” that the consumer has a “reasonable ability to repay” the mortgage. The Act requires
      regulators to establish a class of qualified loans that will receive certain protections from legal liability, such as the
      borrower’s right to rescind the loan and seek damages. Mortgage originators and assignees, including Freddie Mac,
      may be subject to increased legal risk for loans that do not meet these requirements.
    • Under the Dodd-Frank Act, federal regulators, including FHFA, are directed to promulgate regulations, to be
      applicable to financial institutions, including Freddie Mac, that will prohibit incentive-based compensation
      structures that the regulators determine encourage inappropriate risks by providing excessive compensation or
      benefits or that could lead to material financial loss. It is possible that any such regulations will have an adverse
      effect on our ability to retain and recruit management and other employees, as we may be at a competitive
      disadvantage as compared to other potential employers not subject to these or similar regulations.
    For more information on the Dodd-Frank Act, see “BUSINESS — Regulation and Supervision — Legislative and
Regulatory Developments.”

Legislative or regulatory actions could adversely affect our business activities and financial results.
      In addition to the Dodd-Frank Act discussed in the immediately preceding risk factor, and possible GSE reform
discussed in “Conservatorship and Related Matters — The future status and role of Freddie Mac is uncertain and could be
materially adversely affected by legislative and regulatory action that alters the ownership, structure, and mission of the
company,” our business initiatives may be directly adversely affected by other legislative and regulatory actions at the
federal, state, and local levels. We could be negatively affected by legislation or regulatory action that changes the
foreclosure process of any individual state. For example, various states and local jurisdictions have implemented
mediation programs designed to bring servicers and borrowers together to negotiate workout options. These actions could
delay the foreclosure process and increase our expenses, including by potentially delaying the final resolution of seriously
delinquent mortgage loans and the disposition of non-performing assets. We could also be affected by any legislative or
regulatory changes that would expand the responsibilities and liability of servicers and assignees for maintaining vacant
properties prior to foreclosure. These laws and regulatory changes could significantly expand mortgage costs and
liabilities. We could be affected by any legislative or regulatory changes to existing bankruptcy laws or proceedings or
foreclosure processes, including any changes that would allow bankruptcy judges to unilaterally change the terms of
mortgage loans. We could be affected by legislative or regulatory changes that permit or require principal reductions,
including through the bankruptcy process. Our business could also be adversely affected by any modification, reduction,
or repeal of the federal income tax deductibility of mortgage interest payments.
     Pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011, FHFA has been directed to require Freddie
Mac and Fannie Mae to increase guarantee fees by no less than 10 basis points above the average guarantee fees charged
in 2011 on single-family mortgage-backed securities to fund the payroll tax cut. If we are found to be out of compliance
                                                              75                                                   Freddie Mac
with this requirement of the Act for two consecutive years, we will be precluded from providing any guarantee for a
period to be determined by FHFA, but in no case less than one year.
     Legislation or regulatory actions could indirectly adversely affect us to the extent such legislation or actions affect
the activities of banks, savings institutions, insurance companies, securities dealers, and other regulated entities that
constitute a significant part of our customer base or counterparties, or could indirectly affect us to the extent that they
modify industry practices. Legislative or regulatory provisions that create or remove incentives for these entities to sell
mortgage loans to us, purchase our securities or enter into derivatives, or other transactions with us could have a material
adverse effect on our business results and financial condition.
     The Basel Committee on Banking Supervision is in the process of substantially revising capital guidelines for
financial institutions and has finalized portions of the so-called “Basel III” guidelines, which would set new capital and
liquidity requirements for banks. Phase-in of Basel III is expected to take several years and there is significant uncertainty
about how regulators might implement these guidelines or how the resulting regulations might impact us. For example, it
is possible that any new regulations on the capital treatment of mortgage servicing rights, risk-based capital requirements
for credit risk, and liquidity treatment of our debt and guarantee obligations could adversely affect our business results
and financial condition.

We may make certain changes to our business in an attempt to meet the housing goals and subgoals set for us by
FHFA that may increase our losses.
     We may make adjustments to our mortgage loan sourcing and purchase strategies in an effort to meet our housing
goals and subgoals, including changes to our underwriting standards and the expanded use of targeted initiatives to reach
underserved populations. For example, we may purchase loans that offer lower expected returns on our investment and
increase our exposure to credit losses. Doing so could cause us to forgo other purchase opportunities that we would expect
to be more profitable. If our current efforts to meet the goals and subgoals prove to be insufficient, we may need to take
additional steps that could further increase our losses. FHFA has not yet published a final rule with respect to our duty to
serve underserved markets. However, it is possible that we could also make changes to our business in the future in
response to this duty. If we do not meet our housing goals or duty to serve requirements, and FHFA finds that the goals or
requirements were feasible, we may become subject to a housing plan that could require us to take additional steps that
could have an adverse effect on our results of operations and financial condition.

We are involved in legal proceedings, governmental investigations, and IRS examinations that could result in the
payment of substantial damages or otherwise harm our business.
      We are a party to various legal actions, including litigation in the U.S. Tax Court as result of a dispute of certain tax
matters with the IRS related to our 1998 through 2005 federal income tax returns. In addition, certain of our current and
former directors, officers, and employees are involved in legal proceedings for which they may be entitled to
reimbursement by us for costs and expenses of the proceedings. The defense of these or any future claims or proceedings
could divert management’s attention and resources from the needs of the business. We may be required to establish
reserves and to make substantial payments in the event of adverse judgments or settlements of any such claims,
investigations, proceedings, or examinations. Any legal proceeding, governmental investigation, or examination issue, even
if resolved in our favor, could result in negative publicity or cause us to incur significant legal and other expenses.
Furthermore, developments in, outcomes of, impacts of, and costs, expenses, settlements, and judgments related to these
legal proceedings and governmental investigations and examinations may differ from our expectations and exceed any
amounts for which we have reserved or require adjustments to such reserves. We are also cooperating with other
investigations, such as the review being conducted by state attorneys general and state bank and mortgage regulators into
foreclosure practices. These proceedings could divert management’s attention or other resources. See “LEGAL
PROCEEDINGS” and “NOTE 18: LEGAL CONTINGENCIES” for information about our pending legal proceedings and
“NOTE 13: INCOME TAXES” for information about our litigation with the IRS relating to potential additional income
taxes and penalties for the 1998 to 2005 tax years and other tax-related matters.




                                                              76                                                  Freddie Mac
                                   ITEM 1B. UNRESOLVED STAFF COMMENTS
    None.

                                                ITEM 2. PROPERTIES
      Our principal offices consist of five office buildings in McLean, Virginia. We own four of the office buildings,
comprising approximately 1.3 million square feet. We occupy the fifth building, comprising approximately 200,000 square
feet, under a lease from a third party.

                                          ITEM 3. LEGAL PROCEEDINGS
     We are involved as a party to a variety of legal proceedings arising from time to time in the ordinary course of
business. See “NOTE 18: LEGAL CONTINGENCIES” for more information regarding our involvement as a party to
various legal proceedings.

                                      ITEM 4. MINE SAFETY DISCLOSURES
    Not applicable.




                                                           77                                                Freddie Mac
                                                                                                                                                 PART II
                        ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
                     STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information
     Our common stock, par value $0.00 per share, trades in the OTC market and is quoted on the OTC Bulletin Board
under the ticker symbol “FMCC.” As of February 27, 2012, there were 649,733,472 shares of our common stock
outstanding.
     On July 8, 2010, our common stock and 20 previously-listed classes of preferred securities were delisted from the
NYSE. We delisted such securities pursuant to a directive by the Conservator. The classes of preferred stock that were
previously listed on the NYSE also now trade in the OTC market.
     The table below sets forth the high and low prices of our common stock on the NYSE and the high and low bid
information for our common stock on the OTC Bulletin Board for the indicated periods. The OTC Bulletin Board
quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily
represent actual transactions.

Table 7 — Quarterly Common Stock Information
                                                                                                                                                                                                                                                                                                                        High   Low

2011 Quarter Ended(1)
December 31 . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $0.27   $0.18
September 30 . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 0.41     0.24
June 30 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 0.54     0.34
March 31 . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 1.00     0.13
2010 Quarter Ended
December 31(1) . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $0.50   $0.29
September 30(2) . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 0.44     0.24
June 30(3) . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 1.68     0.40
March 31(3) . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 1.52     1.12
(1) Based on bid information for our common stock on the OTC Bulletin Board.
(2) Based on the prices of our common stock on the NYSE prior to July 8, 2010 and bid information for our common stock on the OTC Bulletin Board
    on and after July 8, 2010.
(3) Based on the prices of our common stock on the NYSE.

Holders
       As of February 27, 2012, we had 2,104 common stockholders of record.

Dividends and Dividend Restrictions
       We did not pay any cash dividends on our common stock during 2011 or 2010.
       Our payment of dividends is subject to the following restrictions:

Restrictions Relating to the Conservatorship
     As Conservator, FHFA announced on September 7, 2008 that we would not pay any dividends on Freddie Mac’s
common stock or on any series of Freddie Mac’s preferred stock (other than the senior preferred stock). FHFA has
instructed our Board of Directors that it should consult with and obtain the approval of FHFA before taking actions
involving dividends.

Restrictions Under the Purchase Agreement
     The Purchase Agreement prohibits us and any of our subsidiaries from declaring or paying any dividends on Freddie
Mac equity securities (other than with respect to the senior preferred stock or warrant) without the prior written consent of
Treasury.

Restrictions Under the GSE Act
     Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, if we fail
to meet applicable capital requirements. Under the GSE Act, we are not permitted to make a capital distribution if, after
making the distribution, we would be undercapitalized, except the Director of FHFA may permit us to repurchase shares if
the repurchase is made in connection with the issuance of additional shares or obligations in at least an equivalent amount
and will reduce our financial obligations or otherwise improve our financial condition. If FHFA classifies us as
undercapitalized, we are not permitted to make a capital distribution that would result in our being reclassified as
                                                                                                                                                             78                                                                                                                                                        Freddie Mac
significantly undercapitalized or critically undercapitalized. If FHFA classifies us as significantly undercapitalized,
approval of the Director of FHFA is required for any dividend payment; the Director may approve a capital distribution
only if the Director determines that the distribution will enhance the ability of the company to meet required capital levels
promptly, will contribute to the long-term financial safety-and-soundness of the company, or is otherwise in the public
interest. Our capital requirements have been suspended during conservatorship.

Restrictions Under our Charter
      Without regard to our capital classification, we must obtain prior written approval of FHFA to make any capital
distribution that would decrease total capital to an amount less than the risk-based capital level or that would decrease
core capital to an amount less than the minimum capital level. As noted above, our capital requirements have been
suspended during conservatorship.

Restrictions Relating to Subordinated Debt
      During any period in which we defer payment of interest on qualifying subordinated debt, we may not declare or pay
dividends on, or redeem, purchase or acquire, our common stock or preferred stock. Our qualifying subordinated debt
provides for the deferral of the payment of interest for up to five years if either: (a) our core capital is below 125% of our
critical capital requirement; or (b) our core capital is below our statutory minimum capital requirement, and the Secretary
of the Treasury, acting on our request, exercises his or her discretionary authority pursuant to Section 306(c) of our
charter to purchase our debt obligations. FHFA has directed us to make interest and principal payments on our
subordinated debt, even if we fail to maintain required capital levels. As a result, the terms of any of our subordinated
debt that provide for us to defer payments of interest under certain circumstances, including our failure to maintain
specified capital levels, are no longer applicable. As noted above, our capital requirements have been suspended during
conservatorship.

Restrictions Relating to Preferred Stock
     Payment of dividends on our common stock is also subject to the prior payment of dividends on our 24 series of
preferred stock and one series of senior preferred stock, representing an aggregate of 464,170,000 shares and
1,000,000 shares, respectively, outstanding as of December 31, 2011. Payment of dividends on all outstanding preferred
stock, other than the senior preferred stock, is subject to the prior payment of dividends on the senior preferred stock. We
paid dividends on the senior preferred stock during 2011 at the direction of the Conservator, as discussed in “MD&A —
LIQUIDITY AND CAPITAL RESOURCES — Liquidity — Dividend Obligation on the Senior Preferred Stock” and
“NOTE 12: FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT) — Dividends Declared During 2011.” We did not
declare or pay dividends on any other series of preferred stock outstanding in 2011.

Recent Sales of Unregistered Securities
     The securities we issue are “exempted securities” under the Securities Act of 1933, as amended. As a result, we do
not file registration statements with the SEC with respect to offerings of our securities.
     Following our entry into conservatorship, we suspended the operation of, and ceased making grants under, equity
compensation plans. Previously, we had provided equity compensation under these plans to employees and members of
our Board of Directors. Under the Purchase Agreement, we cannot issue any new options, rights to purchase,
participations, or other equity interests without Treasury’s prior approval. However, grants outstanding as of the date of
the Purchase Agreement remain in effect in accordance with their terms.
     No stock options were exercised during the three months ended December 31, 2011. However, restrictions lapsed on
10,729 restricted stock units.
     See “NOTE 12: FREDDIE MAC STOCKHOLDERS’ EQUITY (DEFICIT)” for more information.

Issuer Purchases of Equity Securities
     We did not repurchase any of our common or preferred stock during the three months ended December 31, 2011.
Additionally, we do not currently have any outstanding authorizations to repurchase common or preferred stock. Under the
Purchase Agreement, we cannot repurchase our common or preferred stock without Treasury’s prior consent, and we may
only purchase or redeem the senior preferred stock in certain limited circumstances set forth in the Certificate of Creation,
                                                             79                                                  Freddie Mac
Designation, Powers, Preferences, Rights, Privileges, Qualifications, Limitations, Restrictions, Terms and Conditions of
Variable Liquidation Preference Senior Preferred Stock.

Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
Telephone: 781-575-2879
http://www.computershare.com/investors




                                                            80                                                 Freddie Mac
                                                           ITEM 6. SELECTED FINANCIAL DATA(1)
     The selected financial data presented below should be reviewed in conjunction with MD&A and our consolidated
financial statements and related notes for the year ended December 31, 2011.
                                                                                                                         At or For The Year Ended December 31,
                                                                                                         2011             2010              2009              2008            2007
                                                                                                                    (dollars in millions, except share-related amounts)
Statements of Income and Comprehensive Income Data
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   $    18,397     $     16,856      $    17,073      $     6,796       $     3,099
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .       (10,702)         (17,218)         (29,530)         (16,432)           (2,854)
Non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           .       (10,878)         (11,588)          (2,732)         (29,175)             (275)
Non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         .        (2,483)          (2,932)          (7,195)          (5,753)           (5,959)
Net loss attributable to Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . .             .        (5,266)         (14,025)         (21,553)         (50,119)           (3,094)
Total comprehensive income (loss) attributable to Freddie Mac . . . . . .                        .        (1,230)             282           (2,913)         (70,483)           (5,786)
Net loss attributable to common stockholders . . . . . . . . . . . . . . . . . .                 .       (11,764)         (19,774)         (25,658)         (50,795)           (3,503)
Net loss per common share:
  Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .         (3.63)           (6.09)           (7.89)          (34.60)            (5.37)
  Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .         (3.63)           (6.09)           (7.89)          (34.60)            (5.37)
Cash dividends per common share . . . . . . . . . . . . . . . . . . . . . . . . .                .            —                —                —              0.50              1.75
Weighted average common shares outstanding (in thousands):(2)
  Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .    3,244,896        3,249,369        3,253,836        1,468,062            651,881
  Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .    3,244,896        3,249,369        3,253,836        1,468,062            651,881
Balance Sheets Data
Mortgage loans held-for-investment, at amortized cost by consolidated
  trusts (net of allowances for loan losses) . . . . . . . . . . . . . . . . . . .               .   $1,564,131      $1,646,172        $        —       $        —        $        —
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .    2,147,216       2,261,780            841,784          850,963           794,368
Debt securities of consolidated trusts held by third parties . . . . . . . . .                   .    1,471,437       1,528,648                 —                —                 —
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .      660,546         713,940            780,604          843,021           738,557
All other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .       15,379          19,593             56,808           38,576            28,906
Total Freddie Mac stockholders’ equity (deficit) . . . . . . . . . . . . . . . .                 .         (146)           (401)             4,278          (30,731)           26,724
Portfolio Balances(3)
Mortgage-related investments portfolio . . . . . . . . . . . . . . . . . . . . . .               .   $ 653,313       $ 696,874         $ 755,272        $ 804,762         $ 720,813
Total Freddie Mac mortgage-related securities(4) . . . . . . . . . . . . . . . .                 .    1,624,684       1,712,918         1,854,813        1,807,553         1,701,207
Total mortgage portfolio(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          .    2,075,394       2,164,859         2,250,539        2,207,476         2,102,676
Non-performing assets(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         .      129,152         125,405           104,984           46,620            16,119
Ratios(7)
Return on average assets(8)(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . .          .          (0.2)%           (0.6)%           (2.5)%            (6.1)%           (0.4)%
Non-performing assets ratio(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . .           .           6.8              6.4              5.2               2.4              0.9
Return on common equity(10)(12) . . . . . . . . . . . . . . . . . . . . . . . . . .              .          N/A              N/A              N/A               N/A             (21.0)
Equity to assets ratio(11)(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       .           —               (0.2)            (1.6)             (0.2)             3.4
 (1) See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for information regarding our accounting policies and the impact of
     new accounting policies on our consolidated financial statements. Effective January 1, 2010, we adopted amendments to the accounting guidance
     for transfers of financial assets and the consolidation of VIEs. This had a significant impact on our consolidated financial statements. Consequently,
     our results for 2010 and 2011 are not comparable with the results for prior years. For more information, see “NOTE 19: SELECTED FINANCIAL
     STATEMENT LINE ITEMS.”
 (2) Includes the weighted average number of shares that are associated with the warrant for our common stock issued to Treasury as part of the
     Purchase Agreement for periods after 2007. This warrant is included in basic loss per share, because it is unconditionally exercisable by the holder
     at a cost of $0.00001 per share.
 (3) Represents the UPB and excludes mortgage loans and mortgage-related securities traded, but not yet settled.
 (4) See “Table 35 — Freddie Mac Mortgage-Related Securities” for the composition of this line item.
 (5) See “Table 16 — Composition of Segment Mortgage Portfolios and Credit Risk Portfolios” for the composition of our total mortgage portfolio.
 (6) See “Table 60 — Non-Performing Assets” for a description of our non-performing assets.
 (7) The dividend payout ratio on common stock is not presented because we are reporting a net loss attributable to common stockholders for all
     periods presented.
 (8) Ratio computed as net income (loss) attributable to Freddie Mac divided by the simple average of the beginning and ending balances of total
     assets.
 (9) Ratio computed as non-performing assets divided by the ending UPB of our total mortgage portfolio, excluding non-Freddie Mac mortgage-related
     securities.
(10) Ratio computed as net income (loss) attributable to common stockholders divided by the simple average of the beginning and ending balances of
     total Freddie Mac stockholders’ equity (deficit), net of preferred stock (at redemption value). Ratio is not presented for periods in which the simple
     average of the beginning and ending balances of total Freddie Mac stockholders’ equity (deficit) is less than zero.
(11) Ratio computed as the simple average of the beginning and ending balances of total Freddie Mac stockholders’ equity (deficit) divided by the
     simple average of the beginning and ending balances of total assets.
(12) To calculate the simple averages for 2010, the beginning balances of total assets and total Freddie Mac stockholders’ equity are based on the
     January 1, 2010 balances, so that both the beginning and ending balances reflect the January 1, 2010 changes in accounting principles related to
     VIEs.




                                                                                             81                                                                     Freddie Mac
                 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                                     AND RESULTS OF OPERATIONS
     You should read this MD&A in conjunction with “BUSINESS — Executive Summary” and our consolidated financial
statements and related notes for the year ended December 31, 2011.

                            MORTGAGE MARKET AND ECONOMIC CONDITIONS, AND OUTLOOK

Mortgage Market and Economic Conditions
Overview
     Despite some improvements in the national unemployment rate, the housing market continued to experience
challenges during 2011 due primarily to continued weakness in the employment market and a significant inventory of
seriously delinquent loans and REO properties in the market. The U.S. real gross domestic product rose by 1.6% during
2011, compared to 3.1% during 2010, according to the Bureau of Economic Analysis estimates released on January 27,
2012. The national unemployment rate was 8.5% in December 2011, compared to 9.4% in December 2010, based on data
from the U.S. Bureau of Labor Statistics. In the data underlying the unemployment rate, there was employment growth
(net new jobs added to the economy) in each month during 2011, which shows evidence of a slow, but steady positive
trend for the economy and the housing market.
       The table below provides important indicators for the U.S. residential mortgage market.

Table 8 — Mortgage Market Indicators
                                                                                                                                                                                                                         Year Ended December 31,
                                                                                                                                                                                                                       2011       2010        2009

Home sale units (in thousands)(1) . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   4,564      4,513      4,715
Home price change(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (3.0)%     (5.9)%     (2.3)%
Single-family originations (in billions)(3) . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 1,350    $ 1,630    $ 1,840
  ARM share(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       12%        10%         7%
  Refinance share(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       79%        80%        73%
U.S. single-family mortgage debt outstanding (in billions)(6) .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $10,336    $10,522    $10,866
U.S. multifamily mortgage debt outstanding (in billions)(6) . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 841      $ 838      $ 847
(1) Includes sales of new and existing homes in the U.S. Source: National Association of Realtors news release dated February 22, 2012 (sales of
    existing homes) and U.S. Census Bureau news release dated February 24, 2012 (sales of new homes).
(2) Calculated internally using estimates of changes in single-family home prices by state, which are weighted using the property values underlying our
    single-family credit guarantee portfolio to obtain a national index. The depreciation rate for each year presented incorporates property value
    information on loans purchased by both Freddie Mac and Fannie Mae through December 31, 2011 and the percentage change will be subject to
    revision based on more recent purchase information. Other indices of home prices may have different results, as they are determined using different
    pools of mortgage loans and calculated under different conventions than our own.
(3) Source: Inside Mortgage Finance estimates of originations of single-family first-and second liens dated January 27, 2012.
(4) ARM share of the dollar amount of total mortgage applications. Source: Mortgage Bankers Association Mortgage Applications Survey. Data reflect
    annual average of weekly figures.
(5) Refinance share of the number of conventional mortgage applications. Source: Mortgage Bankers Association’s Mortgage Applications Survey. Data
    reflect annual average of weekly figures.
(6) Source: Federal Flow of Funds Accounts of the United States dated December 8, 2011. The outstanding amounts for 2011 presented above reflect
    balances as of September 30, 2011.

Single-Family Housing Market
     We believe the number of potential home buyers in the market, combined with the volume of homes offered for sale,
will determine the direction of home prices. Within the industry, existing home sales are important for assessing the rate
at which the mortgage market might absorb the inventory of listed, but unsold, homes in the U.S. (including listed REO
properties). Additionally, we believe new home sales can be an indicator of certain economic trends, such as the potential
for growth in gross domestic product and total U.S. mortgage debt outstanding. Based on data from the National
Association of Realtors, sales of existing homes in 2011 were 4.26 million, increasing from 4.19 million during 2010. The
National Association of Realtors report states that distressed and all-cash sales comprised a historically high volume of
existing home sales in 2011. Investors typically represent the bulk of all-cash transactions. Based on data from the
U.S. Census Bureau and HUD, new home sales in 2011 were approximately 304,000 homes, decreasing approximately
6% from 323,000 homes in 2010. The relative level of mortgage interest rates is also a factor that impacts home sale
demand because lower interest rates result in more affordable housing for borrowers. During 2011, the Federal Reserve
took several actions designed to support an economic recovery and maintain historically low interest rates, which
impacted and will likely continue to impact single-family mortgage market activity, including the volume of mortgage
refinancing.
                                                                                                       82                                                                                                                            Freddie Mac
      The recently expanded and streamlined HARP initiative, together with interest rates that we expect to remain at
historically low levels through much of 2012, may result in a high level of refinancing, particularly for borrowers that are
underwater on their current loans. These changes in HARP allow eligible borrowers whose monthly payments are current
to refinance and obtain substantially lower interest rates and monthly payments, which may reduce future defaults and
help lower the volume of distressed sales in some markets. For information on this initiative, and its potential impact on
our business and results, see “RISK FACTORS — Competitive and Market Risks — The servicing alignment initiative,
MHA Program and other efforts to reduce foreclosures, modify loan terms and refinance mortgages, including HARP, may
fail to mitigate our credit losses and may adversely affect our results of operations or financial condition,” and “RISK
MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan
Workouts and the MHA Program.”
     We estimate that home prices decreased approximately 3.0% nationwide during 2011. This estimate is based on our
own index of mortgage loans in our single-family credit guarantee portfolio. Other indices of home prices may have
different results, as they are determined using different pools of mortgage loans and calculated under different conventions
than our own.
     The serious delinquency rate of our single-family loans declined during 2011, but remained near historically high
levels. The Mortgage Bankers Association reported in its National Delinquency Survey that delinquency rates on all
single-family loans in the survey declined to 7.7% as of December 31, 2011, down from 8.6% at year-end 2010.
Residential loan performance has been generally worse in areas with higher unemployment rates and where declines in
property values have been more significant during the last five years. In its survey, the Mortgage Bankers Association
presents delinquency rates both for mortgages it classifies as subprime and for mortgages it classifies as prime
conventional. The delinquency rates of subprime mortgages are markedly higher than those of prime conventional loan
products in the Mortgage Bankers Association survey; however, the delinquency experience in prime conventional
mortgage loans during the last four years has been significantly worse than in any year since the 1930s.
     Based on data from the Federal Reserve’s Flow of Funds Accounts, there was a sustained and significant increase in
single-family mortgage debt outstanding from 2001 to 2006. This increase in mortgage debt was driven by increasing
sales of new and existing single-family homes during this same period. As reported by FHFA in its Conservator’s Report
on the Enterprises’ Financial Condition, dated June 13, 2011, the market share of mortgage-backed securities issued by
the GSEs and Ginnie Mae declined significantly from 2001 to 2006 while the market share of non-GSE securities peaked.
Non-traditional mortgage types, such as interest-only, Alt-A, and option ARMs, also increased in market share during
these years, which we believe introduced greater risk into the market. We believe these shifts in market activity, in part,
help explain the significant differentiation in delinquency performance of securitized non-GSE and GSE mortgage loans as
discussed below.
     Based on the National Delinquency Survey’s data, we estimate that we owned or guaranteed approximately 24% of
the outstanding single-family mortgages in the U.S. at December 31, 2011, based on number of loans. At December 31,
2011, we held or guaranteed approximately 414,000 seriously delinquent single-family loans, representing approximately
11% of the seriously delinquent single-family mortgages in the market as of that date. We estimate that loans backing
non-GSE securities comprised approximately 9% of the single-family mortgages in the U.S. and represented
approximately 29% of the seriously delinquent single-family mortgages at September 30, 2011 (based on the latest
information available). As of December 31, 2011, we held non-GSE single-family mortgage-related securities with a UPB
of $79.8 billion as investments.
     The foreclosure process continues to experience delays, due to a number of factors. This has caused the average
length of time for foreclosure of a Freddie Mac loan to increase significantly in recent years. Delays in the foreclosure
process may also adversely affect trends in home prices regionally or nationally. For more information, see “RISK
FACTORS — Operational Risks — We have incurred, and will continue to incur, expenses and we may otherwise be
adversely affected by delays and deficiencies in the foreclosure process” and “BUSINESS — Regulation and
Supervision — Legislative and Regulatory Developments — Developments Concerning Single-Family Servicing Practices.”

Multifamily Housing Market
     Multifamily market fundamentals continued to improve on a national level during 2011. This improvement continues
a trend of favorable movements in key indicators such as vacancy rates and effective rents that generally began in early
2010. Vacancy rates and effective rents are important to loan performance because multifamily loans are generally repaid
from the cash flows generated by the underlying property and these factors significantly influence those cash flows. These
improving fundamentals and perceived optimism about demand for multifamily housing has contributed to lower
capitalization rates which has improved property values in most markets. However, the broader economy continues to be
                                                             83                                                Freddie Mac
challenged by persistently high unemployment, which has prevented a more comprehensive recovery of the multifamily
housing market.
Outlook
     Forward-looking statements involve known and unknown risks and uncertainties, some of which are beyond our
control. These statements are not historical facts, but rather represent our expectations based on current information, plans,
judgments, assumptions, estimates, and projections. Actual results may differ significantly from those described in or
implied by such forward-looking statements due to various factors and uncertainties. For example, a number of factors
could cause the actual performance of the housing and mortgage markets and the U.S. economy during 2012 to be
significantly worse than we expect, including adverse changes in consumer confidence, national or international economic
conditions and changes in the federal government’s fiscal policies. See “FORWARD-LOOKING STATEMENTS” for
additional information.
Overview
     We continue to expect key macroeconomic drivers of the economy — such as interest rates, income growth,
employment, and inflation — to affect the performance of the housing and mortgage markets in 2012. Consumer
confidence measures, while up from recession lows, remain below long-term averages and suggest that households will
likely continue to be cautious in home buying. As a result of the continued high unemployment rate and relative low
levels of consumer confidence, we expect that the single-family housing market will likely continue to remain weak in
2012. We also expect rates on fixed-rate single-family mortgages to remain historically low in 2012, which, combined
with the changes to HARP, may help to extend the recent high level of refinancing activity (relative to new purchase
lending activity). Lastly, many large financial institutions continued to experience delays in the foreclosure process for
single-family loans throughout 2011. To the extent a large volume of loans complete the foreclosure process in a short
period of time, the resulting REO inventory could have a negative impact on the housing market.
     We expect that home sales volume in 2012 will be only modestly higher than in 2011. While home prices remain at
significantly lower levels from their peak in most areas, estimates of the inventory of unsold homes, including those held
by financial institutions and distressed borrowers, remain high. Due to these and other factors, our expectation for home
prices, based on our own index, is that national average home prices will continue to remain weak and will likely decline
over the near term before a long-term recovery in housing begins.
Single-Family
     We expect our provision for credit losses and charge-offs will likely remain elevated in 2012. This is due in part to
the substantial number of underwater mortgage loans in our single-family credit guarantee portfolio, as well as the
substantial inventory of seriously delinquent loans. For the near term, we also expect:
     • loss severity of REO dispositions and short sales to remain relatively high, as market conditions, such as home
       prices and the rate of home sales, continue to remain weak;
     • non-performing assets, which include loans classified as TDRs, to continue to remain high;
     • the volume of loan workouts to remain high; and
     • continued high volume of loans in the foreclosure process as well as prolonged foreclosure timelines.
Multifamily
     The most recent market data available continues to reflect improving national apartment fundamentals, including
decreasing vacancy rates and increasing effective rents. However, some geographic areas in which we have investments in
multifamily loans, including the states of Arizona, Georgia, and Nevada, continue to exhibit weaker than average
fundamentals that increase our risk of future losses. We own or guarantee loans in these states that we believe are at risk
of default. We expect our multifamily delinquency rate to remain relatively stable in 2012.
     Recent market data shows a significant increase in multifamily loan activity, compared to 2010 and 2009, and
reflects that the multifamily sector has experienced greater stability and improvement in market fundamentals and investor
demand than other real estate sectors. We remained a constant source of liquidity in the multifamily market. Excluding
CMBS and non-Freddie Mac mortgage-related securities, we estimate that we owned or guaranteed approximately 12.2%
of outstanding mortgage loans in the market as of September 30, 2011, compared to 11.8% as of December 31, 2010. Our
purchase and guarantee of multifamily loans increased approximately 32% to $20.3 billion in 2011, compared to
$15.4 billion in 2010. We expect our purchase and guarantee activity to continue to increase, but at a more moderate
pace, in 2012.
                                                             84                                                  Freddie Mac
                                                      CONSOLIDATED RESULTS OF OPERATIONS
     The following discussion of our consolidated results of operations should be read in conjunction with our
consolidated financial statements, including the accompanying notes. Also see “CRITICAL ACCOUNTING POLICIES
AND ESTIMATES” for information concerning certain significant accounting policies and estimates applied in
determining our reported results of operations.

Change in Accounting Principles
     Our adoption of amendments to the accounting guidance applicable to the accounting for transfers of financial assets
and the consolidation of VIEs had a significant impact on our consolidated financial statements and other financial
disclosures beginning in the first quarter of 2010.
     The cumulative effect of these changes in accounting principles was a net decrease of $11.7 billion to total equity
(deficit) as of January 1, 2010, which included changes to the opening balances of retained earnings (accumulated deficit)
and AOCI. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” “NOTE 3: VARIABLE
INTEREST ENTITIES,” and “NOTE 19: SELECTED FINANCIAL STATEMENT LINE ITEMS” for additional
information regarding these changes.
      As these changes in accounting principles were applied prospectively, our results of operations for the years ended
December 31, 2011 and 2010 (on both a GAAP and Segment Earnings basis), which reflect the consolidation of trusts
that issue our single-family PCs and certain Other Guarantee Transactions, are not directly comparable with the results of
operations for the year ended December 31, 2009, which reflect the accounting policies in effect during that time (i.e.,
when the majority of the securitization entities were accounted for off-balance sheet).

Table 9 — Summary Consolidated Statements of Income and Comprehensive Income
                                                                                                                                                                                        Year Ended December 31,
                                                                                                                                                                                     2011         2010        2009
                                                                                                                                                                                              (in millions)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      . . . . . . . . . . . . . . . . $ 18,397                                    $ 16,856    $ 17,073
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        . . . . . . . . . . . . . . . . (10,702)                                     (17,218)    (29,530)
Net interest income (loss) after provision for credit losses . . . . . . . . . . . . . . . . . . .                 ................                   7,695                                        (362)    (12,457)
Non-interest income (loss):
  Gains (losses) on extinguishment of debt securities of consolidated trusts . . . . . . .                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       (219)       (164)          —
  Gains (losses) on retirement of other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         44        (219)        (568)
  Gains (losses) on debt recorded at fair value . . . . . . . . . . . . . . . . . . . . . . . . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         91         580         (404)
  Derivative gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (9,752)     (8,085)      (1,900)
  Impairment of available-for-sale securities:
     Total other-than-temporary impairment of available-for-sale securities . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (2,101)      (1,778)    (23,125)
     Portion of other-than-temporary impairment recognized in AOCI . . . . . . . . . . .                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      (200)      (2,530)     11,928
       Net impairment of available-for-sale securities recognized in earnings . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (2,301)      (4,308)    (11,197)
  Other gains (losses) on investment securities recognized in earnings . . . . . . . . . .                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      (896)      (1,252)      5,965
  Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     2,155        1,860       5,372
  Total non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   (10,878)     (11,588)     (2,732)
Non-interest expense:
  Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (1,506)     (1,597)     (1,685)
  REO operations expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       (585)       (673)       (307)
  Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       (392)       (662)     (5,203)
     Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (2,483)     (2,932)     (7,195)
Loss before income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (5,666)    (14,882)    (22,384)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        400         856         830
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (5,266)    (14,026)    (21,554)
Other comprehensive income, net of taxes and reclassification adjustments:
  Changes in unrealized gains (losses) related to available-for-sale securities . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,465      13,621      17,825
  Changes in unrealized gains (losses) related to cash flow hedge relationships . . . .                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        509         673         773
  Changes in defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         62          13          42
     Total other comprehensive income, net of taxes and reclassification adjustments                               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      4,036      14,307      18,640
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (1,230)        281      (2,914)
  Less: Comprehensive loss attributable to noncontrolling interest . . . . . . . . . . . . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         —            1           1
Total comprehensive income (loss) attributable to Freddie Mac . . . . . . . . . . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $   (1,230)   $    282    $ (2,913)

Net Interest Income
      The table below summarizes our net interest income and net interest yield and provides an attribution of changes in
annual results to changes in interest rates or changes in volumes of our interest-earning assets and interest-bearing
liabilities. Average balance sheet information is presented because we believe end-of-period balances are not
                                                                                             85                                                                                                      Freddie Mac
representative of activity throughout the periods presented. For most components of the average balances, a daily
weighted average balance was calculated for the period. When daily weighted average balance information was not
available, a simple monthly average balance was calculated.

Table 10 — Average Balance, Net Interest Income, and Rate/Volume Analysis
                                                                                                                  Year Ended December 31,
                                                                                    2011                                       2010                                      2009
                                                                                    Interest                                   Interest                                  Interest
                                                                   Average           Income       Average    Average            Income       Average    Average           Income      Average
                                                                  Balance(1)(2)   (Expense)(1)     Rate     Balance (1)(2)
                                                                                                                             (Expense)(1)     Rate     Balance(1)(2)   (Expense)(1)    Rate
                                                                                                                       (dollars in millions)
Interest-earning assets:
   Cash and cash equivalents . . . . . . . . . . . .          .   $     45,381     $       34      0.07%    $     48,803     $       77       0.16%     $ 55,764        $     193      0.35%
   Federal funds sold and securities purchased
     under agreements to resell . . . . . . . . . . .         .         27,557             33      0.12           46,739             79       0.17           28,524            48      0.17
   Mortgage-related securities:
     Mortgage-related securities(3) . . . . . . . . .         .        442,284         20,357      4.60          526,748         25,366       4.82          675,167         32,563     4.82
     Extinguishment of PCs held by Freddie
        Mac . . . . . . . . . . . . . . . . . . . . . . .     .       (162,600)        (7,665)     (4.71)       (213,411)        (11,182)    (5.24)              —              —        —
        Total mortgage-related securities, net . . .          .        279,684         12,692       4.54         313,337          14,184      4.53          675,167         32,563     4.82
   Non-mortgage-related securities(3) . . . . . . . .         .         24,587             99       0.40          27,995             191      0.68           16,471            727     4.42
   Mortgage loans held by consolidated
     trusts(4)(5) . . . . . . . . . . . . . . . . . . . . .   .    1,627,956         77,158        4.74      1,722,387         86,698         5.03            —               —          —
   Unsecuritized mortgage loans(4)(6) . . . . . . . .         .      244,134          9,124        3.74        206,116          8,727         4.23       127,429           6,815       5.35
           Total interest-earning assets . . . . . . .        .   $2,249,299       $ 99,140        4.41     $2,365,377       $109,956         4.65      $903,355        $ 40,346       4.47
Interest-bearing liabilities:
   Debt securities of consolidated trusts including
     PCs held by Freddie Mac . . . . . . . . . . .            .   $1,643,939       $(74,784)       (4.55)   $1,738,330       $ (86,398)      (4.97)     $       —       $      —         —
   Extinguishment of PCs held by Freddie Mac .                .     (162,600)         7,665         4.71      (213,411)         11,182        5.24              —              —         —
     Total debt securities of consolidated trusts
        held by third parties . . . . . . . . . . . . .       .       1,481,339        (67,119)    (4.53)       1,524,919        (75,216)    (4.93)             —              —         —
   Other debt:
     Short-term debt . . . . . . . . . . . . . . . . .        .      186,304           (331)       (0.18)      219,654            (552)      (0.25)      287,259          (2,234)      (0.78)
     Long-term debt(7) . . . . . . . . . . . . . . . .        .      503,842        (12,538)       (2.49)      543,306         (16,363)      (3.01)      557,184         (19,916)      (3.57)
        Total other debt . . . . . . . . . . . . . . . .      .      690,146        (12,869)       (1.86)      762,960         (16,915)      (2.22)      844,443         (22,150)      (2.62)
           Total interest-bearing liabilities . . . . .       .    2,171,485        (79,988)       (3.68)    2,287,879         (92,131)      (4.03)      844,443         (22,150)      (2.62)
   Expense related to derivatives(8) . . . . . . . . .        .           —            (755)       (0.04)           —             (969)      (0.04)           —           (1,123)      (0.13)
   Impact of net non-interest-bearing funding . . .           .       77,814             —          0.13        77,498              —         0.13        58,912              —         0.17
     Total funding of interest-earning assets . . .           .   $2,249,299       $(80,743)       (3.59)   $2,365,377       $ (93,100)      (3.94)     $903,355        $(23,273)      (2.58)
     Net interest income/yield . . . . . . . . . . . .        .                    $ 18,397         0.82                     $ 16,856         0.71                      $ 17,073        1.89




                                                                                                    86                                                                       Freddie Mac
                                                                                                                                                                                2011 vs. 2010 Variance Due to       2010 vs. 2009 Variance Due to
                                                                                                                                                                                                        Total                               Total
                                                                                                                                                                                    (9)          (9)
                                                                                                                                                                               Rate       Volume       Change      Rate(9)    Volume(9)    Change
                                                                                                                                                                                                          (in millions)
Interest-earning assets:
   Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .       . . . . . . . . . . . . . . . . . $                                                         (33)            $           (10)            $           (43)     $   (83)    $     (33)   $    (116)
   Federal funds sold and securities purchased under agreements to resell . .              . . . . . . . . . . . . . . . . .                                                           (19)                        (27)                        (46)          (1)           32           31
   Mortgage-related securities:
     Mortgage-related securities(3) . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   . (1,082)                        (3,927)                      (5,009)                (50)      (7,147)      (7,197)
     Extinguishment of PCs held by Freddie Mac . . . . . . . . . . . . . . . .             .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   1,042                         2,475                        3,517                  —       (11,182)     (11,182)
        Total mortgage-related securities, net . . . . . . . . . . . . . . . . . . .       .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .     (40)                       (1,452)                      (1,492)                (50)     (18,329)     (18,379)
   Non-mortgage-related securities(3) . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .     (71)                          (21)                         (92)               (850)         314         (536)
   Mortgage loans held by consolidated trusts(4)(5) . . . . . . . . . . . . . . . .        .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   . (4,921)                        (4,619)                      (9,540)                 —        86,698       86,698
   Unsecuritized mortgage loans(4)(6) . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   . (1,097)                         1,494                          397              (1,641)       3,553        1,912
           Total interest-earning assets . . . . . . . . . . . . . . . . . . . . . . .     .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   . $(6,181)                      $(4,635)                    $(10,816)            $(2,625)    $ 72,235     $ 69,610
Interest-bearing liabilities:
   Debt securities of consolidated trusts including PCs held by Freddie Mac                . . . . . . . . . . . . . . . . . $ 7,077                                                                   $ 4,537                     $ 11,614             $     —     $(86,398)    $(86,398)
   Extinguishment of PCs held by Freddie Mac . . . . . . . . . . . . . . . . .             . . . . . . . . . . . . . . . . . (1,042)                                                                    (2,475)                      (3,517)                  —       11,182       11,182
     Total debt securities of consolidated trusts held by third parties . . . . .          . . . . . . . . . . . . . . . . .   6,035                                                                     2,062                        8,097                   —      (75,216)     (75,216)
   Other debt:
     Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .     145                            76                          221               1,248          434        1,682
     Long-term debt(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   2,697                         1,128                        3,825               3,068          485        3,553
        Total other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   2,842                         1,204                        4,046               4,316          919        5,235
           Total interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . .    .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   8,877                         3,266                       12,143               4,316      (74,297)     (69,981)
   Expense related to derivatives(8) . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   .     214                            —                           214                 154           —           154
     Total funding of interest-earning assets . . . . . . . . . . . . . . . . . . .        .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   . $ 9,091                       $ 3,266                     $ 12,357             $ 4,470     $(74,297)    $(69,827)
     Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .       .       .       .   .   .   .   .   .   .   .   .   .   .   . $ 2,910                       $(1,369)                    $ 1,541              $ 1,845     $ (2,062)    $ (217)


(1) Excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(2) We calculate average balances based on amortized cost.
(3) Interest income (expense) includes accretion of the portion of impairment charges recognized in earnings where we expect a significant improvement
    in cash flows.
(4) Non-performing loans, where interest income is generally recognized when collected, are included in average balances.
(5) Loan fees, primarily consisting of delivery fees, included in interest income for mortgage loans held by consolidated trusts were $405 million,
    $127 million, and $0 million for 2011, 2010, and 2009, respectively.
(6) Loan fees, primarily consisting of delivery fees and multifamily prepayment fees, included in unsecuritized mortgage loan interest income were
    $223 million, $130 million, and $78 million for 2011, 2010, and 2009, respectively.
(7) Includes current portion of long-term debt.
(8) Represents changes in fair value of derivatives in closed cash flow hedge relationships that were previously deferred in AOCI and have been
    reclassified to earnings as the associated hedged forecasted issuance of debt affects earnings.
(9) Rate and volume changes are calculated on the individual financial statement line item level. Combined rate/volume changes were allocated to the
    individual rate and volume change based on their relative size.

        The table below summarizes components of our net interest income.

Table 11 — Net Interest Income
                                                                                                                                                                                                                                                        Year Ended December 31,
                                                                                                                                                                                                                                                      2011        2010       2009
                                                                                                                                                                                                                                                              (in millions)
Contractual amounts of net interest income(1) . . . . . . . . . . .                    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,448                                                                                                 $17,743       $18,937
Amortization income (expense), net:(2)
  Accretion of impairments on available-for-sale securities(3)                         ..................................                                                                                                                               115             392          1,180
  Asset-related amortization income (expense), net:
     Mortgage loans held by consolidated trusts . . . . . . . . .                      .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      (1,942)               (712)         —
     Unsecuritized mortgage loans . . . . . . . . . . . . . . . . . .                  .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         182                 311         233
     Mortgage-related securities . . . . . . . . . . . . . . . . . . . .               .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        (239)               (272)     (1,345)
     Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        (122)                (23)         —
       Asset-related amortization expense, net . . . . . . . . . .                     .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      (2,121)               (696)     (1,112)
  Debt-related amortization income (expense), net:
     Debt securities of consolidated trusts . . . . . . . . . . . . .                  .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   3,383                 1,152            —
     Other long-term debt securities . . . . . . . . . . . . . . . . .                 .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (673)                 (766)         (809)
       Debt-related amortization income (expense), net . . . .                         .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   2,710                   386          (809)
       Total amortization income (expense), net . . . . . . . . .                      .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     704                    82          (741)
Expense related to derivatives(4) . . . . . . . . . . . . . . . . . . . .              .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (755)                 (969)       (1,123)
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .            .   .   .       .       .       .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $18,397               $16,856       $17,073


(1) Includes the reversal of interest income accrued, net of interest received on a cash basis, related to mortgage loans that are on non-accrual status.
(2) Represents amortization related to premiums, discounts, deferred fees and other adjustments to the carrying value of our financial instruments, and
    the reclassification of previously deferred balances from AOCI for certain derivatives in closed cash flow hedge relationships related to individual
    debt issuances and mortgage purchase transactions.
(3) The portion of the impairment charges recognized in earnings where we expect a significant improvement in cash flows is recognized as net interest
    income. Upon our adoption of an amendment to the accounting guidance for investments in debt and equity securities on April 1, 2009, previously
    recognized non-credit-related other-than-temporary impairments are no longer accreted into net interest income.
(4) Represents changes in fair value of derivatives in closed cash flow hedge relationships that were previously deferred in AOCI and have been
    reclassified to earnings as the associated hedged forecasted issuance of debt affects earnings.

                                                                                                                               87                                                                                                                                        Freddie Mac
     Net interest income and net interest yield increased $1.5 billion and 11 basis points, respectively, during the year
ended December 31, 2011, compared to the year ended December 31, 2010. The primary driver underlying the increases
was lower funding costs from the replacement of debt at lower rates. This factor was partially offset by the reduction in
the average balance of higher-yielding mortgage-related assets due to continued liquidations and limited purchase activity.
     Net interest income decreased by $217 million during the year ended December 31, 2010, compared to the year
ended December 31, 2009, primarily due to: (a) the reduction in the average balance of higher-yielding mortgage-related
assets due to liquidations and limited purchase activity; and (b) higher interest expense on seriously delinquent mortgage
loans. These factors were partially offset by: (a) lower funding costs from the replacement of debt at lower rates and
favorable rate resets on floating-rate debt; and (b) the inclusion of amounts previously classified as management and
guarantee income. Net interest yield declined substantially during the year ended December 31, 2010, compared to the
year ended December 31, 2009, because the net interest yield of the assets held in our consolidated single-family trusts
was lower than the net interest yield of PCs previously included in net interest income and our balance of non-performing
mortgage loans increased.
     We do not recognize interest income on non-performing loans that have been placed on non-accrual status, except
when cash payments are received. We refer to this interest income that we do not recognize as foregone interest income.
Foregone interest income and reversals of previously recognized interest income, net of cash received, related to non-
performing loans was $4.0 billion, $4.7 billion, and $349 million during the years ended December 31, 2011, 2010, and
2009, respectively. The reduction during the year ended December 31, 2011 compared to the year ended December 31,
2010, was primarily due to the decreased volume of non-performing loans on non-accrual status.
      The increase during the year ended December 31, 2010 compared to the year ended December 31, 2009 was
primarily due to our adoption of amendments to the accounting guidance related to the accounting for transfers of
financial assets and consolidation of VIEs. Prior to adoption of these amendments and subsequent consolidation of certain
trusts, we did not reverse interest income on non-performing loans for loans held by the trusts, and the forgone interest
income on non-performing loans of the trusts did not reduce net interest income or net interest yield, since it was
accounted for through a charge to provision for credit losses.
     During the year ended December 31, 2011, spreads on our debt and our access to the debt markets remained
favorable relative to historical levels. For more information, see “LIQUIDITY AND CAPITAL RESOURCES —
Liquidity.”
      The objectives set for us under our charter and conservatorship, restrictions in the Purchase Agreement and
restrictions imposed by FHFA have negatively impacted, and will continue to negatively impact, our net interest income.
For example, our mortgage-related investments portfolio is subject to a cap that decreases by 10% each year until the
portfolio reaches $250 billion. This decline in asset balances will likely cause a corresponding reduction in our interest
income over time. For more information on the various restrictions and limitations on our investment activity and our
mortgage-related investments portfolio, see “BUSINESS — Conservatorship and Related Matters — Impact of
Conservatorship and Related Actions on Our Business — Limits on Investment Activity and Our Mortgage-Related
Investments Portfolio.”

Provision for Credit Losses
     We maintain loan loss reserves at levels we believe appropriate to absorb probable incurred losses on mortgage loans
held-for-investment and loans underlying our financial guarantees. Increases in our loan loss reserves are generally
reflected in earnings through the provision for credit losses.
     Since the beginning of 2008, on an aggregate basis, we have recorded provision for credit losses associated with
single-family loans of approximately $73.2 billion, and have recorded an additional $4.3 billion in losses on loans
purchased from our PCs, net of recoveries. The majority of these losses are associated with loans originated in 2005
through 2008. While loans originated in 2005 through 2008 will give rise to additional credit losses that have not yet been
incurred, and thus have not been provisioned for, we believe that, as of December 31, 2011, we have reserved for or
charged-off the majority of the total expected credit losses for these loans. Nevertheless, various factors, such as continued
high unemployment rates or further declines in home prices, could require us to provide for losses on these loans beyond
our current expectations. See “Table 3 — Credit Statistics, Single-Family Credit Guarantee Portfolio” for certain quarterly
credit statistics for our single-family credit guarantee portfolio.
     Our provision for credit losses was $10.7 billion in 2011 compared to $17.2 billion in 2010. The provision for credit
losses in 2011 reflects a decline in the rate at which single-family loans transition into serious delinquency or are
modified, but was partially offset by our lowered expectations for mortgage insurance recoveries, which is due to the
                                                             88                                                  Freddie Mac
continued deterioration in the financial condition of the mortgage insurance industry in 2011. The provision for credit
losses declined to $17.2 billion in 2010 compared to $29.5 billion in 2009, and reflected a decline in the rate at which
delinquent loans transitioned into serious delinquency, partially offset by a higher volume of loan modifications that were
classified as TDRs in 2010, compared to 2009. See “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk”
for further information on our mortgage insurance counterparties. We identified a prior period error in the second quarter
of 2010 that impacted our provision for credit losses and allowance for loan losses. The cumulative effect, net of taxes, of
this error corrected in 2010 was $1.2 billion, of which $0.9 billion related to the year ended December 31, 2009.
     During 2011, our charge-offs, net of recoveries for single-family loans, exceeded the amount of our provision for
credit losses. Our charge-offs in 2011 remained elevated, but reflect suppression of activity due to delays in the
foreclosure process and continuing weak market conditions, such as home prices and the rate of home sales. We believe
the level of our charge-offs will continue to remain high and may increase in 2012.
     We continued to experience a high volume of completed loan modifications classified as TDRs during 2011, but the
volume of such modifications was less than the volume during 2010. See “Table 54 — Reperformance Rates of Modified
Single-Family Loans” for information on the performance of our modified loans. As of December 31, 2011 and
December 31, 2010, the UPB of our single-family non-performing loans was $120.5 billion and $115.5 billion,
respectively. These amounts include $44.4 billion and $26.6 billion, respectively, of single-family TDRs that are
reperforming (i.e., less than three months past due). TDRs remain categorized as non-performing throughout the
remaining life of the loan regardless of whether the borrower makes payments which return the loan to a current payment
status after modification. See “RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk” for further information on
our single-family credit guarantee portfolio, including credit performance, charge-offs, our loan loss reserves balance, and
our non-performing assets.
     We adopted an amendment to the accounting guidance related to the classification of loans as TDRs in the third
quarter of 2011, which significantly increases the population of problem loans subject to our workout activities that we
account for and disclose as TDRs. The impact of this change in guidance on our financial results for 2011 was not
significant. We expect that the number of loans that newly qualify as TDRs in 2012 will remain high, primarily because
we anticipate that the majority of our modifications, both completed and those still in trial periods, will be considered
TDRs. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” and “NOTE 5: INDIVIDUALLY
IMPAIRED AND NON-PERFORMING LOANS” for additional information on our TDR loans, including our
implementation of changes to the accounting guidance related to the classification of loans as TDRs.
      While the total number of seriously delinquent loans declined approximately 10% and 7% during 2011 and 2010,
respectively, in part due to a significant volume of loan modifications (upon completion of a modification, a delinquent
single-family loan is given a current payment status), our serious delinquency rate remains high compared to historical
levels due to the continued weakness in home prices, persistently high unemployment, extended foreclosure timelines and
foreclosure suspensions in many states, and continued challenges faced by servicers processing large volumes of problem
loans. Our seller/servicers have an active role in our loan workout activities, including under the servicing alignment
initiative and the MHA Program, and a decline in their performance could result in a failure to realize the anticipated
benefits of our loss mitigation plans. The decline in size of our single-family credit guarantee portfolio in 2011 caused our
serious delinquency rate to be higher than it otherwise would have been because this rate is calculated on a smaller base
of loans at year end.
     Our provision for credit losses and amount of charge-offs in the future will be affected by a number of factors,
including: (a) the actual level of mortgage defaults; (b) the impact of the MHA Program and other loss mitigation efforts;
(c) any government actions or programs that impact the ability of troubled borrowers to obtain modifications, including
legislative changes to bankruptcy laws; (d) changes in property values; (e) regional economic conditions, including
unemployment rates; (f) delays in the foreclosure process, including those related to the concerns about deficiencies in
foreclosure documentation practices; (g) third-party mortgage insurance coverage and recoveries; and (h) the realized rate
of seller/servicer repurchases. See “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk” for additional
information on seller/servicer repurchase obligations.
     Our provision (benefit) for credit losses associated with our multifamily mortgage portfolio was $(196) million and
$99 million for 2011 and 2010, respectively. Our loan loss reserves associated with our multifamily mortgage portfolio
were $545 million and $828 million as of December 31, 2011 and December 31, 2010, respectively. The decline in loan
loss reserves for multifamily loans in 2011 was driven primarily by positive market trends in vacancy rates and effective
rents, as well as stabilizing or improved property values. However, some states in which we have investments in
                                                             89                                                 Freddie Mac
multifamily mortgage loans, including Nevada, Arizona, and Georgia, continue to exhibit weaker than average apartment
fundamentals.

Non-Interest Income (Loss)
Gains (Losses) on Extinguishment of Debt Securities of Consolidated Trusts
     When we purchase PCs that have been issued by consolidated PC trusts, we extinguish a pro rata portion of the
outstanding debt securities of the related consolidated trusts. We recognize a gain (loss) on extinguishment of the debt
securities to the extent the amount paid to extinguish the debt security differs from its carrying value. For the years ended
December 31, 2011 and 2010, we extinguished debt securities of consolidated trusts with a UPB of $75.4 billion and
$17.8 billion, respectively (representing our purchase of single-family PCs with a corresponding UPB amount). The
increase in purchases of single-family PCs was due to an increased volume of dollar roll transactions to support the
market and pricing of our single-family PCs. Losses on extinguishment of these debt securities of consolidated trusts were
$219 million and $164 million for the years ended December 31, 2011 and 2010, respectively. The losses during 2011 and
2010 were primarily due to the repurchase of our debt securities at higher net purchase premiums driven by a decrease in
interest rates during the periods. See “Table 25 — Total Mortgage-Related Securities Purchase Activity” for additional
information regarding purchases of mortgage-related securities, including those issued by consolidated PC trusts.

Gains (Losses) on Retirement of Other Debt
     We repurchase or call our outstanding other debt securities from time to time when we believe it is economically
beneficial and to manage the mix of liabilities funding our assets. When we repurchase or call outstanding debt securities,
or holders put outstanding debt securities to us, we recognize a gain or loss to the extent the amount paid to redeem the
debt security differs from its carrying value. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES”
for more information regarding our accounting policies related to debt retirements.
     Gains (losses) on retirement of other debt were $44 million, $(219) million, and $(568) million during the years
ended December 31, 2011, 2010, and 2009, respectively. We recognized gains on debt retirements during 2011, compared
to losses during 2010, because we purchased debt with lower associated discounts in 2011 relative to the comparable
periods in 2010. We recognized fewer losses on debt retirement during 2010 compared to 2009 primarily due to decreased
losses on calls and puts in 2010 compared to 2009. For more information, see “LIQUIDITY AND CAPITAL
RESOURCES — Liquidity — Other Debt Securities — Other Debt Retirement Activities.”

Gains (Losses) on Debt Recorded at Fair Value
     Gains (losses) on debt recorded at fair value primarily relate to changes in the fair value of our foreign-currency
denominated debt. During 2011 and 2010, we recognized gains on debt recorded at fair value of $91 million and
$580 million, respectively, primarily due to a combination of the U.S. dollar strengthening relative to the Euro and
changes in interest rates. During 2009, we recognized losses on debt recorded at fair value of $404 million primarily due
to the U.S. dollar weakening relative to the Euro. We mitigate changes in the fair value of our foreign-currency
denominated debt by using foreign currency swaps and foreign-currency denominated interest-rate swaps.

Derivative Gains (Losses)
     The table below presents derivative gains (losses) reported in our consolidated statements of income and
comprehensive income. See “NOTE 11: DERIVATIVES — Table 11.2 — Gains and Losses on Derivatives” for
information about gains and losses related to specific categories of derivatives. Changes in fair value and interest accruals
on derivatives not in hedge accounting relationships are recorded as derivative gains (losses) in our consolidated
statements of income and comprehensive income. At December 31, 2011, 2010, and 2009, we did not have any
derivatives in hedge accounting relationships; however, there are amounts recorded in AOCI related to discontinued cash
flow hedges. Amounts recorded in AOCI associated with these closed cash flow hedges are reclassified to earnings when
the forecasted transactions affect earnings. If it is probable that the forecasted transaction will not occur, then the deferred
gain or loss associated with the forecasted transaction is reclassified into earnings immediately.
     While derivatives are an important aspect of our strategy to manage interest-rate risk, they generally increase the
volatility of reported net income (loss) because, while fair value changes in derivatives affect net income (loss), fair value
changes in several of the types of assets and liabilities being hedged do not affect net income (loss).
                                                               90                                                  Freddie Mac
Table 12 — Derivative Gains (Losses)
                                                                                                                                                                                                                                                                  Derivative Gains (Losses)
                                                                                                                                                                                                                                                                 Year Ended December 31,
                                                                                                                                                                                                                                                               2011         2010         2009
                                                                                                                                                                                                                                                                        (in millions)
Interest-rate swaps . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $(10,367)   $(7,679)     $ 13,611
Option-based derivatives(1) . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    7,176      4,843       (10,686)
Other derivatives(2) . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   (1,529)      (755)         (882)
Accrual of periodic settlements(3)             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   (5,032)    (4,494)       (3,943)
   Total . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ (9,752)   $(8,085)     $ (1,900)

(1) Primarily includes purchased call and put swaptions and purchased interest-rate caps and floors.
(2) Includes futures, foreign-currency swaps, commitments, swap guarantee derivatives, and credit derivatives. Foreign-currency swaps are defined as
    swaps in which net settlement is based on one leg calculated in a foreign-currency and the other leg calculated in U.S. dollars. Commitments
    include: (a) our commitments to purchase and sell investments in securities; (b) our commitments to purchase mortgage loans; and (c) our
    commitments to purchase and extinguish or issue debt securities of our consolidated trusts.
(3) Includes imputed interest on zero-coupon swaps.

      Gains (losses) on derivatives not accounted for in hedge accounting relationships are principally driven by changes
in: (a) interest rates and implied volatility; and (b) the mix and volume of derivatives in our derivative portfolio.
     Our mix and volume of derivatives change from period to period as we respond to changing interest rate
environments. We use receive- and pay-fixed interest-rate swaps to adjust the interest-rate characteristics of our debt
funding in order to more closely match changes in the interest-rate characteristics of our mortgage-related assets. A
receive-fixed swap results in our receipt of a fixed interest-rate payment from our counterparty in exchange for a variable-
rate payment. Conversely, a pay-fixed swap requires us to make a fixed interest-rate payment to our counterparty in
exchange for a variable-rate payment. Receive-fixed swaps increase in value and pay-fixed swaps decrease in value when
interest rates decrease (with the opposite being true when interest rates increase).
     We use swaptions and other option-based derivatives to adjust the interest-rate characteristics of our debt in response
to changes in the expected lives of our investments in mortgage-related assets. Purchased call and put swaptions, where
we make premium payments, are options for us to enter into receive- and pay-fixed swaps, respectively. Conversely,
written call and put swaptions, where we receive premium payments, are options for our counterparty to enter into receive
and pay-fixed swaps, respectively. The fair values of both purchased and written call and put swaptions are sensitive to
changes in interest rates and are also driven by the market’s expectation of potential changes in future interest rates
(referred to as “implied volatility”). Purchased swaptions generally become more valuable as implied volatility increases
and less valuable as implied volatility decreases. Recognized losses on purchased options in any given period are limited
to the premium paid to purchase the option plus any unrealized gains previously recorded. Potential losses on written
options are unlimited.
      We also use derivatives to synthetically create the substantive economic equivalent of various debt funding structures.
For example, the combination of a series of short-term debt issuances over a defined period and a pay-fixed interest-rate
swap with the same maturity as the last debt issuance is the substantive economic equivalent of a long-term fixed-rate
debt instrument of comparable maturity. Similarly, the combination of non-callable debt and a call swaption with the same
maturity as the noncallable debt is the substantive economic equivalent of callable debt. For a discussion regarding our
ability to issue debt, see “LIQUIDITY AND CAPITAL RESOURCES — Liquidity — Other Debt Securities.”
     During 2011, we recognized losses on derivatives of $9.8 billion, primarily due to declines in long-term swap interest
rates. Specifically, during 2011, we recognized fair value losses on our pay-fixed swap positions of $23.0 billion, partially
offset by fair value gains on our receive-fixed swaps of $12.6 billion. We also recognized fair value gains of $7.2 billion
during 2011 on our option-based derivatives, resulting from gains on our purchased call swaptions as interest rates
decreased. Additionally, we recognized losses of $5.0 billion related to the accrual of periodic settlements during 2011
due to our net pay-fixed swap position and a declining interest rate environment during the year.
     During 2010, declining long-term swap interest rates resulted in a loss on derivatives of $8.1 billion. Specifically, the
decrease in long-term swap interest rates resulted in fair value losses on our pay-fixed swaps of $17.5 billion, partially
offset by fair value gains on our receive-fixed swaps of $9.7 billion. We recognized fair value gains of $4.8 billion on our
option-based derivatives, resulting from gains on our purchased call swaptions primarily due to the declines in interest
rates during 2010. Additionally, we recognized losses of $4.5 billion related to the accrual of periodic settlements during
2010 due to our net pay-fixed swap position and a declining interest rate environment during the year.
     During 2009, the mix and volume of our derivative portfolio were impacted by fluctuations in swap interest rates,
resulting in a loss on derivatives of $1.9 billion. Long-term swap interest rates and implied volatility both increased during
                                                                                                                                                   91                                                                                                                          Freddie Mac
2009. As a result of these factors, we recorded gains on our pay-fixed swap positions, partially offset by losses on our
receive-fixed swaps, resulting in a $13.6 billion net gain. We also recorded losses of $10.7 billion on option-based
derivatives, primarily on our purchased call swaptions, as the impact of the increasing swap interest rates more than offset
the impact of higher implied volatility.

Investment Securities-Related Activities
     Since January 1, 2010, as a result of our adoption of amendments to the accounting guidance for transfers of
financial assets and consolidation of VIEs, we no longer account for the single-family PCs and certain Other Guarantee
Transactions we hold as investments in securities. Instead, we now recognize the underlying mortgage loans on our
consolidated balance sheets through consolidation of the related trusts. Our adoption of these amendments resulted in a
decrease in our investments in securities of $286.5 billion on January 1, 2010. See “NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES” for additional information.

Impairments of Available-For-Sale Securities
     We recorded net impairments of available-for-sale securities recognized in earnings, which were related to non-
agency mortgage-related securities, of $2.3 billion, $4.3 billion, and $11.2 billion during the years ended December 31,
2011, 2010, and 2009. See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities —
Mortgage-Related Securities — Other-Than-Temporary Impairments on Available-For-Sale Mortgage-Related Securities”
and “NOTE 7: INVESTMENTS IN SECURITIES” for information regarding the accounting principles for investments in
debt and equity securities and the other-than-temporary impairments recorded during the years ended December 31, 2011,
2010, and 2009.

Other Gains (Losses) on Investment Securities Recognized in Earnings
     Other gains (losses) on investment securities recognized in earnings primarily consists of gains (losses) on trading
securities. We recognized $(1.0) billion, $(1.3) billion, and $4.9 billion related to gains (losses) on trading securities
during the years ended December 31, 2011, 2010, and 2009.
      Trading securities mainly include Treasury securities, agency fixed-rate and variable-rate pass-through mortgage-
related securities, and agency REMICs, including inverse floating-rate, interest-only and principal-only securities. With the
exception of principal-only securities, our agency securities, classified as trading, were at a net premium (i.e. have higher
net fair value than UPB) as of December 31, 2011. Gains (losses) on trading securities do not include the interest earned
on these assets, which is recorded as part of net interest income. Additionally, our securities classified as trading are
managed in the overall context of our interest-rate risk management strategy and framework. However, the impacts of
changes in fair value of related derivatives and other debt are not recognized in other gains (losses) on investment
securities recognized in earnings on our consolidated statements of income and comprehensive income.
     During the years ended December 31, 2011 and 2010, the losses on trading securities were primarily due to the
movement of securities with unrealized gains towards maturity. The decreased losses during the year ended December 31,
2011, compared to the year ended December 31, 2010, was primarily due to higher fair value gains at the end of 2011 as
a result of a decline in longer-term interest rates.
     At December 31, 2009, the fair value of our investments in trading securities was $222.3 billion, compared to
$58.8 billion and $60.3 billion at December 31, 2011 and 2010, respectively. The significant reduction in the fair value of
our investments in trading securities was primarily due to our adoption of amendments to the accounting guidance for
transfers of financial assets and consolidation of VIEs, as noted above. The larger balance in our investments in trading
securities during 2009, combined with tightening OAS levels, contributed to the gains on these trading securities. In
addition, during the year ended December 31, 2009, we sold agency securities classified as trading with an aggregate UPB
of approximately $148.7 billion, which generated realized gains of $1.7 billion.
   For a further discussion of our interest-rate risk management strategy and framework, see “QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.”

Other Income
     Other income includes items associated with our guarantee activities on non-consolidated trusts, including
management and guarantee income, gains (losses) on guarantee asset, income on guarantee obligation, gains (losses) on
sale of mortgage loans, and trust management income (expense). Upon consolidation of our single-family PC trusts and
certain Other Guarantee Transactions commencing January 1, 2010, guarantee-related items no longer have a material
impact on our results and are therefore included in other income on our consolidated statements of income and
                                                             92                                                  Freddie Mac
comprehensive income. The management and guarantee income recognized during 2011 and 2010 was earned from our
non-consolidated securitization trusts and other mortgage credit guarantees which had an aggregate UPB of $56.9 billion
and $44.0 billion as of December 31, 2011 and 2010, respectively, compared to $1.87 trillion as of December 31, 2009.
For additional information on the impact of consolidation of our single-family PC trusts and certain Other Guarantee
Transactions, see “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” and “NOTE 19: SELECTED
FINANCIAL STATEMENT LINE ITEMS.”
       The table below summarizes the significant components of other income.

Table 13 — Other Income
                                                                                                                                                                                                           Year Ended December 31,
                                                                                                                                                                                                          2011       2010      2009
                                                                                                                                                                                                                 (in millions)
Other income:
  Management and guarantee income(1) . . . . . . . . . . . . . . . . . . .                  ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 170     $ 143     $ 3,033
  Gains (losses) on guarantee asset . . . . . . . . . . . . . . . . . . . . . .             ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (78)      (61)     3,299
  Income on guarantee obligation . . . . . . . . . . . . . . . . . . . . . . .              ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    153       135      3,479
  Gains (losses) on sale of mortgage loans . . . . . . . . . . . . . . . . .                ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    411       267        745
  Lower-of-cost-or-fair-value adjustments on held-for-sale mortgage                         loans(2)   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     —         —        (679)
  Gains (losses) on mortgage loans recorded at fair value . . . . . . .                     ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    418      (249)      (190)
  Recoveries on loans impaired upon purchase . . . . . . . . . . . . . .                    ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    473       806        379
  Low-income-housing tax credit partnerships(3) . . . . . . . . . . . . . .                 ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     —         —      (4,155)
  Trust management income (expense)(2) . . . . . . . . . . . . . . . . . .                  ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     —         —        (761)
  All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    608       819        222
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      ......     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $2,155    $1,860    $ 5,372

(1) Most of our guarantee related income in 2011 and 2010 relates to securitized multifamily mortgage loans where we have not consolidated the
    securitization trusts on our consolidated balance sheets.
(2) Upon consolidation of our single-family PC trusts and certain Other Guarantee Transactions on January 1, 2010, we no longer incur trust
    management income and expenses and no longer incur lower-of-cost-or-fair-value adjustments on single-family mortgage loans since all of our
    single-family mortgage loans are classified as held-for-investment rather than held-for-sale.
(3) We wrote down the carrying value of our LIHTC investments to zero as of December 31, 2009, as we will not be able to realize any value for these
    assets either through reductions to our taxable income and related tax liabilities or through a sale to a third party. See “NOTE 3: VARIABLE
    INTEREST ENTITIES” for further information.

     Other income increased to $2.2 billion for the year ended December 31, 2011, compared to $1.9 billion for the year
ended December 31, 2010, primarily due to gains on mortgage loans recorded at fair value in 2011, compared to losses on
mortgage loans recorded at fair value in 2010, which was partially offset by lower recoveries on loans impaired upon
purchase and a decline in all other income in 2011. We recognized gains on mortgage loans recorded at fair value during
2011, compared to losses in 2010, as a result of declines in interest rates and higher balances of loans recorded at fair
value during 2011.

Gains (Losses) on Sale of Mortgage Loans
     In 2011 and 2010, we recognized $411 million and $267 million, respectively, in gains (losses) on sale of mortgage
loans with associated UPB of $13.7 billion and $6.6 billion, respectively. All gains (losses) on sales of mortgage loans in
2011 and 2010 relate to multifamily mortgage loans.
     Gains (losses) on sale of mortgage loans declined to $267 million in 2010 from $745 million in 2009, primarily due
to our adoption of amendments to the accounting guidance applicable to the accounting for transfers of financial assets
and the consolidation of VIEs, as all single-family loans are consolidated on our balance sheets and are no longer
recognized as sales when we issue our PCs.

Lower-of-Cost-or-Fair-Value Adjustments on Held-for-Sale Mortgage Loans
     We recognized lower-of-cost-or-fair-value adjustments of $(679) million in 2009. Due to our adoption of amendments
to the accounting guidance applicable to the accounting for transfers of financial assets and the consolidation of VIEs, all
single-family mortgage loans on our consolidated balance sheet were reclassified as held-for-investment on January 1,
2010. Consequently, beginning in 2010, we no longer record lower-of-cost-or-fair-value adjustments on single-family
mortgage loans. During 2009, we transferred $10.6 billion of single-family mortgage loans from held-for-sale to held-for-
investment. Upon transfer, we evaluated the lower of cost or fair value for each individual loan. We recognized
approximately $438 million of losses associated with these transfers during 2009, representing the unrealized losses of
certain loans on the dates of transfer; however, we were not permitted to similarly recognize any unrealized gains on
individual loans at the time of transfer.
                                                                                             93                                                                                                                      Freddie Mac
Recoveries on Loans Impaired upon Purchase
     Recoveries on loans impaired upon purchase represent the recapture into income of previously recognized losses
associated with purchases of delinquent loans from our PCs in conjunction with our guarantee activities. Recoveries occur
when a non-performing loan is repaid in full or when at the time of foreclosure the estimated fair value of the acquired
property, less costs to sell, exceeds the carrying value of the loan. For impaired loans where the borrower has made
required payments that return the loan to less than three months past due, the recovery amounts are instead recognized as
interest income over time as periodic payments are received.
     During 2011, 2010, and 2009, we recognized recoveries on loans impaired upon purchase of $473 million,
$806 million and $379 million, respectively. Our recoveries on loans impaired upon purchase declined in 2011, compared
to 2010, due to a lower volume of foreclosure transfers and payoffs associated with loans impaired upon purchase.
Recoveries on impaired loans increased in 2010, compared to 2009, due to a higher volume of short sales and foreclosure
transfers, combined with improvements in home prices in certain geographical areas during 2010.
      Commencing January 1, 2010, we no longer recognize losses on loans purchased from PC pools related to our single-
family PC trusts and certain Other Guarantee Transactions due to adoption of the amendments to the accounting guidance
for transfers of financial assets and consolidation of VIEs. Our recoveries in 2011 and 2010 principally relate to impaired
loans purchased prior to January 1, 2010, due to the change in accounting guidance effective on that date. Consequently,
our recoveries on loans impaired upon purchase will generally continue to decline over time. See “NOTE 1: SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES” for further information about the impact of adoption of these accounting
changes.

All Other
     All other income declined to $608 million during the year ended December 31, 2011, compared to $819 million
during the year ended December 31, 2010, primarily due to: (a) gains recognized in 2010 due to the recognition of
income related to mortgage-servicing rights associated with TBW, one of our former seller/servicers; and (b) the
correction in 2011 of certain prior period accounting errors not material to our financial statements.
     All other income increased to $819 million in 2010 from $222 million in 2009, primarily due to the recognition of
income related to mortgage-servicing rights associated with TBW, and penalties and other fees on single-family seller
servicers, including penalties arising from failures to complete foreclosures within required time periods, and to a lesser
extent, recognition of expected loss recoveries from certain legal claims.

Non-Interest Expense
      The table below summarizes the components of non-interest expense.

Table 14 — Non-Interest Expense
                                                                                                                                                                                                                                                                     Year Ended December 31,
                                                                                                                                                                                                                                                                    2011       2010      2009
                                                                                                                                                                                                                                                                           (in millions)
Administrative expenses:(1)
  Salaries and employee benefits .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 832     $ 895     $ 912
  Professional services . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    270       297       344
  Occupancy expense . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     62        64        68
  Other administrative expense . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    342       341       361
     Total administrative expenses .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 1,506      1,597     1,685
REO operations expense . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    585       673       307
Other expenses . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    392       662     5,203
Total non-interest expense . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $2,483    $2,932    $7,195

(1) Commencing in the first quarter of 2011, we reclassified certain expenses from other expenses to professional services expense. Prior period
    amounts have been reclassified to conform to the current presentation.

Administrative Expenses
     Administrative expenses decreased in 2011 compared to 2010, largely due to a reduction in the number of employees
as part of our ongoing focus on cost reduction measures. Administrative expenses decreased in 2010 compared to 2009, in
part due to our focus on cost reduction measures in 2010, particularly on professional services costs. We do not expect
that our general and administrative expenses for 2012 will continue to decline, in part due to the continually changing
mortgage market, an environment in which we are subject to increased regulatory oversight and mandates and strategic
                                                                                                                                             94                                                                                                                                Freddie Mac
arrangements that we may enter into with outside firms to provide operational capability and staffing for key functions, if
needed.

REO Operations Expense
     The table below presents the components of our REO operations expense, and REO inventory and disposition
information.

Table 15 — REO Operations Expense, REO Inventory, and REO Dispositions
                                                                                                                                                                                                                                Year Ended December 31,
                                                                                                                                                                                                                             2011           2010         2009
                                                                                                                                                                                                                                   (dollars in millions)
REO operations expense:
  Single-family:
     REO property expenses(1) . . . . . . . . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 1,205      $ 1,163       $  708
     Disposition (gains) losses, net(2) . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     179          102          749
     Change in holding period allowance, dispositions                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (456)        (286)        (427)
     Change in holding period allowance, inventory(3)                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     302          497         (185)
     Recoveries(4) . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    (634)        (800)        (558)
  Total single-family REO operations expense . . . . .                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     596          676          287
  Multifamily REO operations expense (income) . . .                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (11)          (3)          20
Total REO operations expense . . . . . . . . . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $   585      $   673       $ 307
REO inventory (in properties), at December 31:
  Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                60,535       72,079       45,047
  Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                    20           14            5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                            60,555       72,093       45,052
REO property dispositions           (in properties):
  Single-family . . . . . . .       ........................................................                                                                                                                                110,175      101,206       69,400
  Multifamily . . . . . . . .       ........................................................                                                                                                                                     19            9            6
Total . . . . . . . . . . . . . .   ........................................................                                                                                                                                110,194      101,215       69,406

(1) Consists of costs incurred to acquire, maintain or protect a property after it is acquired in a foreclosure transfer, such as legal fees, insurance, taxes,
    and cleaning and other maintenance charges.
(2) Represents the difference between the disposition proceeds, net of selling expenses, and the fair value of the property on the date of the foreclosure
    transfer.
(3) Represents the (increase) decrease in the estimated fair value of properties that were in inventory during the period.
(4) Includes recoveries from primary mortgage insurance, pool insurance and seller/servicer repurchases.

     REO operations expense was $585 million in 2011, as compared to $673 million in 2010 and $307 million in 2009.
The decline in REO operations expense in 2011, compared to 2010, was primarily due to the impact of a less significant
decline in home prices in certain geographical areas with significant REO activity resulting in lower write-downs of
single-family REO inventory during 2011, partially offset by lower recoveries on REO properties during 2011. Lower
recoveries on REO properties in 2011, compared to 2010, were primarily due to reduced recoveries from mortgage
insurers, in part due to the continued deterioration in the financial condition of the mortgage insurance industry, and a
decline in reimbursements of losses from seller/servicers associated with repurchase requests on loans on which we have
foreclosed. The increase in REO operations expense in 2010, compared to 2009, is a result of higher REO property
expenses and holding period write-downs that were partially offset by lower disposition losses and increased recoveries.
We expect REO property expenses to continue to remain high in 2012 due to expected continued high levels of single-
family REO acquisitions and inventory.
     In 2011, we believe the volume of our single-family REO acquisitions was less than it otherwise would have been
due to delays in the foreclosure process, particularly in states that require a judicial foreclosure process. The acquisition
slowdown, coupled with high disposition levels, led to an approximate 16% reduction in REO property inventory during
2011. While we expect the delays to ease in 2012, we also expect the length of the foreclosure process will remain above
historical levels. For more information on how delays in the foreclosure process could adversely affect our REO
operations expense, see “RISK FACTORS — Operational Risks — We have incurred, and will continue to incur, expenses
and we may otherwise be adversely affected by delays and deficiencies in the foreclosure process.” See “RISK
MANAGEMENT— Credit Risk — Mortgage Credit Risk — Non-Performing Assets” for additional information about our
REO activity.

Other Expenses
     Other expenses were $0.4 billion, $0.7 billion, and $5.2 billion in 2011, 2010, and 2009, respectively. Other expenses
in 2011 and 2010 consist primarily of HAMP servicer incentive fees, costs related to terminations and transfers of
mortgage servicing, and other miscellaneous expenses. Other expenses were lower in 2011 compared to 2010, primarily
                                                                                                                     95                                                                                                                       Freddie Mac
due to lower expenses associated with transfers and terminations of mortgage servicing, primarily related to TBW,
partially offset by higher servicer incentive fees associated with HAMP during 2011. Other expenses declined significantly
from 2009 to 2010 due to reduction of losses on loans purchased, which was due to the change in accounting guidance
for consolidation of VIEs we implemented on January 1, 2010. See “NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES — Recently Adopted Accounting Guidance” and “NOTE 19: SELECTED FINANCIAL
STATEMENT LINE ITEMS” for additional information.

Income Tax Benefit
     For 2011, 2010, and 2009, we reported income tax benefit of $0.4 billion, $0.9 billion, and $0.8 billion, respectively,
resulting in effective tax rates of 7%, 6%, and 4%, respectively. Our effective tax rate differed from the federal statutory
tax rate of 35% primarily due to the establishment of a valuation allowance against a portion of our net deferred tax
assets. Our income tax benefits represent amounts related to the amortization of net deferred losses on pre-2008 closed
cash flow hedges, as well as the current tax benefits associated with our ability to carry back net operating tax losses
generated in 2008 and 2009. See “NOTE 13: INCOME TAXES” for additional information.

Total Comprehensive Income (Loss)
     Our total comprehensive income (loss) was $(1.2) billion, $0.3 billion, and $(2.9) billion for the years ended
December 31, 2011, 2010, and 2009, respectively, consisting of: (a) $(5.3) billion, $(14.0) billion, and $(21.6) billion of
net income (loss), respectively; and (b) $4.0 billion, $14.3 billion, and $18.6 billion of total other comprehensive income,
respectively. See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Total Equity (Deficit)” for additional
information regarding total other comprehensive income (loss).

Segment Earnings
     Our operations consist of three reportable segments, which are based on the type of business activities each
performs — Investments, Single-family Guarantee, and Multifamily. Certain activities that are not part of a reportable
segment are included in the All Other category.
    The Investments segment reflects results from our investment, funding and hedging activities. In our Investments
segment, we invest principally in mortgage-related securities and single-family performing mortgage loans, which are
funded by other debt issuances and hedged using derivatives. In our Investments segment, we also provide funding and
hedging management services to the Single-family Guarantee and Multifamily segments. The Investments segment reflects
changes in the fair value of the Multifamily segment assets that are associated with changes in interest rates. Segment
Earnings for this segment consist primarily of the returns on these investments, less the related funding, hedging, and
administrative expenses.
     The Single-family Guarantee segment reflects results from our single-family credit guarantee activities. In our Single-
family Guarantee segment, we purchase single-family mortgage loans originated by our seller/servicers in the primary
mortgage market. In most instances, we use the mortgage securitization process to package the purchased mortgage loans
into guaranteed mortgage-related securities. We guarantee the payment of principal and interest on the mortgage-related
securities in exchange for management and guarantee fees. Segment Earnings for this segment consist primarily of
management and guarantee fee revenues, including amortization of upfront fees, less credit-related expenses,
administrative expenses, allocated funding costs, and amounts related to net float benefits or expenses.
     The Multifamily segment reflects results from our investment (both purchases and sales), securitization, and
guarantee activities in multifamily mortgage loans and securities. Although we hold multifamily mortgage loans and non-
agency CMBS that we purchased for investment, our purchases of such multifamily mortgage loans for investment have
declined significantly since 2010, and our purchases of CMBS have declined significantly since 2008. The only CMBS
that we have purchased since 2008 have been senior, mezzanine, and interest-only tranches related to certain of our
securitization transactions, and these purchases have not been significant. Currently, our primary business strategy is to
purchase multifamily mortgage loans for aggregation and then securitization. We guarantee the senior tranches of these
securitizations in Other Guarantee Transactions. Our Multifamily segment also issues Other Structured Securities, but does
not issue REMIC securities. Our Multifamily segment also enters into other guarantee commitments for multifamily HFA
bonds and housing revenue bonds held by third parties. Historically, we issued multifamily PCs, but this activity has been
insignificant in recent years. Segment Earnings for this segment consist primarily of the interest earned on assets related
to multifamily investment activities and management and guarantee fee income, less credit-related expenses,
administrative expenses, and allocated funding costs. In addition, the Multifamily segment reflects gains on sale of
                                                             96                                                 Freddie Mac
mortgages and the impact of changes in fair value of CMBS and held-for-sale loans associated only with factors other
than changes in interest rates, such as liquidity and credit.
     We evaluate segment performance and allocate resources based on a Segment Earnings approach, subject to the
conduct of our business under the direction of the Conservator. The financial performance of our Single-family Guarantee
segment and Multifamily segment are measured based on each segment’s contribution to GAAP net income (loss). Our
Investments segment is measured on its contribution to GAAP total comprehensive income (loss), which consists of the
sum of its contribution to: (a) GAAP net income (loss); and (b) GAAP total other comprehensive income, net of taxes.
The sum of Segment Earnings for each segment and the All Other category equals GAAP net income (loss) attributable to
Freddie Mac. Likewise, the sum of total comprehensive income (loss) for each segment and the All Other category equals
GAAP total comprehensive income (loss) attributable to Freddie Mac.
     The All Other category consists of material corporate level expenses that are: (a) infrequent in nature; and (b) based
on management decisions outside the control of the management of our reportable segments. By recording these types of
activities to the All Other category, we believe the financial results of our three reportable segments reflect the decisions
and strategies that are executed within the reportable segments and provide greater comparability across time periods. The
All Other category also includes the deferred tax asset valuation allowance associated with previously recognized income
tax credits carried forward and, in 2009, the write-down of our LIHTC investments.
     In presenting Segment Earnings, we make significant reclassifications to certain financial statement line items in
order to reflect a measure of net interest income on investments and a measure of management and guarantee income on
guarantees that is in line with how we manage our business. We present Segment Earnings by: (a) reclassifying certain
investment-related activities and credit guarantee-related activities between various line items on our GAAP consolidated
statements of income and comprehensive income; and (b) allocating certain revenues and expenses, including certain
returns on assets and funding costs, and all administrative expenses to our three reportable segments.
     As a result of these reclassifications and allocations, Segment Earnings for our reportable segments differs
significantly from, and should not be used as a substitute for, net income (loss) as determined in accordance with GAAP.
Our definition of Segment Earnings may differ from similar measures used by other companies. However, we believe that
Segment Earnings provides us with meaningful metrics to assess the financial performance of each segment and our
company as a whole.
     Beginning January 1, 2010, we revised our method for presenting Segment Earnings to reflect changes in how
management measures and assesses the performance of each segment and the company as a whole. This change in
method, in conjunction with our implementation of the amendments to the accounting guidance relating to transfers of
financial assets and the consolidation of VIEs, resulted in significant changes to our presentation of Segment Earnings.
Segment Earnings for 2009 do not include changes to the guarantee asset, guarantee obligation, or other items that were
eliminated or changed as a result of our implementation of the aforementioned amendments to the accounting guidance,
as these amendments were applied prospectively consistent with our GAAP results. As a result, our Segment Earnings
results for 2011 and 2010 are not directly comparable with the results for 2009. See “NOTE 1: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES” for further information regarding the consolidation of certain of our
securitization trusts.
     See “NOTE 14: SEGMENT REPORTING” for further information regarding our segments, including the descriptions
and activities of the segments and the reclassifications and allocations used to present Segment Earnings.




                                                             97                                                 Freddie Mac
    The table below provides information about our various segment mortgage portfolios at December 31, 2011, 2010,
and 2009. For a discussion of each segment’s portfolios, see “Segment Earnings — Results.”

Table 16 — Composition of Segment Mortgage Portfolios and Credit Risk Portfolios(1)
                                                                                                                                                                                                     December 31, 2011      December 31, 2010
                                                                                                                                                                                                                   (in millions)
Segment mortgage portfolios:
Investments — Mortgage investments portfolio:
  Single-family unsecuritized mortgage loans(2) . . . . . . . . . . . . . . . . . . . . .                                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      $ 109,190             $    79,097
  Freddie Mac mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        220,659                 263,152
  Non-agency mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . .                                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         86,526                  99,639
  Non-Freddie Mac agency securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         32,898                  39,789
Total Investments — Mortgage investments portfolio . . . . . . . . . . . . . . . . . . .                                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        449,273                 481,677
Single -family Guarantee — Managed loan portfolio:(3)
  Single-family unsecuritized mortgage loans(4) . . . . . . . . . . . . . . . . . . . . .                                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          62,469                69,766
  Single-family Freddie Mac mortgage-related securities held by us . . . . . . .                                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         220,659               261,508
  Single-family Freddie Mac mortgage-related securities held by third parties .                                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       1,378,881             1,437,399
  Single-family other guarantee commitments(5) . . . . . . . . . . . . . . . . . . . . .                                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          11,120                 8,632
Total Single-family Guarantee — Managed loan portfolio . . . . . . . . . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       1,673,129             1,777,305
Multifamily — Guarantee portfolio:(3)
  Multifamily Freddie Mac mortgage related securities held by us . . . . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           3,008                  2,095
  Multifamily Freddie Mac mortgage related securities held by third parties . .                                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          22,136                 11,916
  Multifamily other guarantee commitments(5) . . . . . . . . . . . . . . . . . . . . . .                                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           9,944                 10,038
Total Multifamily — Guarantee portfolio . . . . . . . . . . . . . . . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          35,088                 24,049
Multifamily — Mortgage investments portfolio(3)
  Multifamily investment securities portfolio . . . . . . . . . . . . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          59,260                59,548
  Multifamily loan portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          82,311                85,883
Total Multifamily — Mortgage investments portfolio . . . . . . . . . . . . . . . . . . .                                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         141,571               145,431
Total Multifamily portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         176,659               169,480
Less : Freddie Mac single-family and certain multifamily securities(6) . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        (223,667)             (263,603)
Total mortgage portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      $2,075,394            $2,164,859
Credit risk portfolios:(7)
Single-family credit guarantee portfolio:
  Single-family mortgage loans, on-balance sheet . . . . . . . . . . . . . . . . . . . . . . . . .                                               .   .   .   .   .   .   .   .   .   .   .   .   .      $1,733,215            $1,799,256
  Non-consolidated Freddie Mac mortgage-related securities . . . . . . . . . . . . . . . . .                                                     .   .   .   .   .   .   .   .   .   .   .   .   .          10,735                11,268
  Other guarantee commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .          11,120                 8,632
  Less: HFA-related guarantees(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                        .   .   .   .   .   .   .   .   .   .   .   .   .          (8,637)               (9,322)
  Less: Freddie Mac mortgage-related securities backed by Ginnie Mae certificates(8)                                                             .   .   .   .   .   .   .   .   .   .   .   .   .            (779)                 (857)
Total single-family credit guarantee portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .      $1,745,654            $1,808,977
Multifamily mortgage portfolio:
  Multifamily mortgage loans, on-balance sheet . . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      $  82,311             $  85,883
  Non-consolidated Freddie Mac mortgage-related securities                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         25,144                14,011
  Other guarantee commitments . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          9,944                10,038
  Less: HFA-related guarantees(8) . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         (1,331)               (1,551)
Total multifamily mortgage portfolio . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      $ 116,068             $ 108,381

(1) Based on UPB and excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(2) Excludes unsecuritized seriously delinquent single-family loans managed by the Single-family Guarantee segment. However, the Single-family
    Guarantee segment continues to earn management and guarantee fees associated with unsecuritized single-family loans in the Investments segment’s
    mortgage investments portfolio.
(3) The balances of the mortgage-related securities in these portfolios are based on the UPB of the security, whereas the balances of our single-family
    credit guarantee and multifamily mortgage portfolios presented in this report are based on the UPB of the mortgage loans underlying the related
    security. The differences in the loan and security balances result from the timing of remittances to security holders, which is typically 45 or 75 days
    after the mortgage payment cycle of fixed-rate and ARM PCs, respectively.
(4) Represents unsecuritized seriously delinquent single-family loans managed by the Single-family Guarantee segment.
(5) Represents the UPB of mortgage-related assets held by third parties for which we provide our guarantee without our securitization of the related
    assets.
(6) Freddie Mac single-family mortgage-related securities held by us are included in both our Investments segment’s mortgage investments portfolio and
    our Single-family Guarantee segment’s managed loan portfolio, and Freddie Mac multifamily mortgage-related securities held by us are included in
    both the multifamily investment securities portfolio and the multifamily guarantee portfolio. Therefore, these amounts are deducted in order to
    reconcile to our total mortgage portfolio.
(7) Represents the UPB of loans for which we present characteristics, delinquency data, and certain other statistics in this report. See “GLOSSARY” for
    further description.
(8) We exclude HFA-related guarantees and our resecuritizations of Ginnie Mae certificates from our credit risk portfolios and most related statistics
    because these guarantees do not expose us to meaningful amounts of credit risk due to the credit enhancement provided on them by the U.S.
    government.




                                                                                                     98                                                                                                                     Freddie Mac
Segment Earnings — Results
Investments
       The table below presents the Segment Earnings of our Investments segment.

Table 17 — Segment Earnings and Key Metrics — Investments(1)
                                                                                                                                                                                                                      Year Ended December 31,
                                                                                                                                                                                                                   2011          2010          2009
                                                                                                                                                                                                                         (dollars in millions)
Segment Earnings:
  Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  ........................... $                                                                                  7,339     $ 6,192      $   8,090
  Non-interest income (loss):
    Net impairment of available-for-sale securities . . . . . . . . . . .                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (1,833)       (3,819)       (9,870)
    Derivative gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (3,597)       (1,859)        4,695
    Gains (losses) on trading securities . . . . . . . . . . . . . . . . . . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       (993)       (1,386)        4,885
    Gains (losses) on sale of mortgage loans . . . . . . . . . . . . . . .                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         28           (76)          617
    Gains (losses) on mortgage loans recorded at fair value . . . . .                                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        501            34           (46)
    Other non-interest income (loss) . . . . . . . . . . . . . . . . . . . . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      1,266         1,023          (774)
       Total non-interest income (loss). . . . . . . . . . . . . . . . . . . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (4,628)       (6,083)         (493)
  Non-interest expense:
    Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       (398)        (455)        (515)
    Other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . .                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         (2)         (18)         (33)
       Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . .                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       (400)        (473)        (548)
  Segment adjustments(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        661        1,358           —
  Segment Earnings before income tax benefit (expense) . . . . . . .                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,972          994        7,049
  Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . .                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        394          259         (572)
  Segment Earnings, net of taxes, including noncontrolling interest                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,366        1,253        6,477
  Less: Net income — noncontrolling interest . . . . . . . . . . . . . . .                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         —            (2)          (1)
  Segment Earnings, net of taxes . . . . . . . . . . . . . . . . . . . . . . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,366        1,251        6,476
  Total other comprehensive income, net of taxes . . . . . . . . . . . .                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,107       10,226       11,329
  Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . .                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $    6,473     $ 11,477     $ 17,805
Key metrics — Investments:
Portfolio balances:
  Average balances of interest-earning assets:(3)(4)(5)
     Mortgage-related securities(6) . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $386,115       $465,048     $600,562
     Non-mortgage-related investments(7) . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   97,519        123,537      100,759
     Unsecuritized single-family loans . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   94,894         59,028       49,013
        Total average balances of interest-earning assets            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $578,528       $647,613     $750,334
Return:
  Net interest yield — Segment Earnings basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                    1.27%         0.96%         1.08%
(1) For reconciliations of the Segment Earnings line items to the comparable line items in our consolidated financial statements prepared in accordance
    with GAAP, see “NOTE 14: SEGMENT REPORTING — Table 14.2 — Segment Earnings and Reconciliation to GAAP Results.”
(2) For a description of our segment adjustments, see “NOTE 14: SEGMENT REPORTING — Segment Earnings.”
(3) Excludes mortgage loans and mortgage-related securities traded, but not yet settled.
(4) Excludes non-performing single-family mortgage loans.
(5) We calculate average balances based on amortized cost.
(6) Includes our investments in single-family PCs and certain Other Guarantee Transactions, which have been consolidated under GAAP on our
    consolidated balance sheet since January 1, 2010.
(7) Includes the average balances of interest-earning cash and cash equivalents, non-mortgage-related securities, and federal funds sold and securities
    purchased under agreements to resell.

     Segment Earnings for our Investments segment increased by $2.1 billion to $3.4 billion in 2011, compared to
$1.3 billion in 2010. Comprehensive income for our Investments segment decreased by $5.0 billion to $6.5 billion in
2011, compared to $11.5 billion in 2010.
      During 2011, the UPB of the Investments segment mortgage investments portfolio decreased by 6.7%. We held
$253.6 billion of agency securities and $86.5 billion of non-agency mortgage-related securities as of December 31, 2011,
compared to $302.9 billion of agency securities and $99.6 billion of non-agency mortgage-related securities as of
December 31, 2010. The decline in UPB of agency securities is due mainly to liquidations, including prepayments and
selected sales. The decline in UPB of non-agency mortgage-related securities is due mainly to the receipt of monthly
remittances of principal repayments from both the recoveries of liquidated loans and, to a lesser extent, voluntary
repayments of the underlying collateral, representing a partial return of our investments in these securities. Since the
beginning of 2007, we have incurred actual principal cash shortfalls of $1.5 billion on impaired non-agency mortgage-
related securities in the Investments segment. See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in
Securities” for additional information regarding our mortgage-related securities.
                                                                                                             99                                                                                                                      Freddie Mac
     Segment Earnings net interest income increased $1.1 billion, and Segment Earnings net interest yield increased
31 basis points during 2011, compared to 2010. The primary driver was lower funding costs, primarily due to the
replacement of debt at lower rates. These lower funding costs were partially offset by the reduction in the average balance
of higher-yielding mortgage-related assets due to continued liquidations and limited purchase activity.
     Segment Earnings non-interest income (loss) was $(4.6) billion in 2011, compared to $(6.1) billion in 2010. This
improvement in non-interest loss was mainly due to decreased net impairment of available-for-sale securities and
decreased losses on trading securities, partially offset by increased derivative losses.
     Impairments recorded in our Investments segment decreased by $2.0 billion during 2011, compared to 2010,
primarily due to the impact of lower interest rates in 2011 resulting in a benefit from expected structural credit
enhancements on the securities. The impact of lower interest rates was partially offset by the impact of declines in
forecasted home prices. See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities —
Mortgage-Related Securities — Other-Than-Temporary Impairments on Available-For-Sale Mortgage-Related Securities”
for additional information on our impairments.
     We recorded losses on trading securities of $(1.0) billion during 2011, compared to $(1.4) billion during 2010.
Losses in both periods are primarily due to the movement of securities with unrealized gains towards maturity. These
losses were partially offset by larger fair value gains in 2011, due to a more significant decline in long-term interest rates,
compared to 2010.
     We recorded derivative gains (losses) for this segment of $(3.6) billion during 2011, compared to $(1.9) billion
during 2010. While derivatives are an important aspect of our strategy to manage interest-rate risk, they generally increase
the volatility of reported Segment Earnings, because while fair value changes in derivatives affect Segment Earnings, fair
value changes in several of the types of assets and liabilities being hedged do not affect Segment Earnings. During 2011
and 2010, swap interest rates decreased, resulting in fair value losses on our pay-fixed swaps, partially offset by fair value
gains on our receive-fixed swaps and purchased call swaptions. See “Non-Interest Income (Loss) — Derivative Gains
(Losses)” for additional information on our derivatives.
     Our Investments segment’s total other comprehensive income was $3.1 billion in 2011. Net unrealized losses in
AOCI on our available-for-sale securities decreased by $2.6 billion during 2011, primarily attributable to the impact of
declining interest rates, resulting in fair value gains on our agency securities, and the recognition in earnings of other-
than-temporary impairments on our non-agency mortgage-related securities, partially offset by the impact of widening
OAS levels on our single-family non-agency mortgage-related securities. The changes in fair value of CMBS, excluding
impacts from the changes in interest rates, are reflected in the Multifamily segment.
     Segment Earnings for our Investments segment decreased by $5.2 billion to $1.3 billion in 2010, compared to
$6.5 billion in 2009. Comprehensive income for our Investments segment decreased by $6.3 billion to $11.5 billion in
2010, compared to $17.8 billion in 2009.
     Segment Earnings net interest income and net interest yield decreased $1.9 billion and 12 basis points, respectively,
during 2010, compared to 2009. The primary driver underlying these decreases was a decrease in the average balance of
mortgage-related securities, partially offset by a decrease in funding costs as a result of the replacement of higher-cost
long-term debt at lower rates.
     Segment Earnings non-interest loss increased $5.6 billion in 2010, compared to 2009. Included in other non-interest
income (loss) are gains (losses) on trading securities of $(1.4) billion in 2010, compared to $4.9 billion in 2009. In 2010,
the losses on trading securities was primarily due to the movement of securities with unrealized gains towards maturity,
particularly interest-only securities, partially offset by fair value gains on our non-interest-only securities classified as
trading primarily due to decreased interest rates. The net gains on trading securities during 2009 related primarily to
tightening OAS levels.
      We recorded derivative gains (losses) for this segment of $(1.9) billion during 2010, compared to $4.7 billion during
2009. During 2010, swap interest rates decreased, resulting in fair value losses on our pay-fixed swaps, partially offset by
fair value gains on our receive-fixed swaps and purchased call swaptions. During 2009, longer-term swap interest rates
increased, resulting in fair value gains on our pay-fixed swaps, partially offset by fair value losses on our receive-fixed
swaps.
     Impairments recorded in our Investments segment decreased by $6.1 billion during 2010, compared to 2009.
Impairments for 2010 and 2009 are not comparable because the adoption of the amendment to the accounting guidance
for investments in debt and equity securities on April 1, 2009 significantly impacted both the identification and
measurement of other-than-temporary impairments.
                                                              100                                                 Freddie Mac
     Our Investments segment’s total other comprehensive income was $10.2 billion during 2010. Net unrealized losses in
AOCI on our available-for-sale securities decreased by $9.5 billion during 2010, primarily attributable to the impact of
declining interest rates, resulting in fair value gains on our agency, single-family non-agency, and CMBS mortgage-related
securities. In addition, the impact of widening OAS levels on our single-family non-agency mortgage-related securities
during these periods was offset by fair value gains related to the movement of securities with unrealized losses towards
maturity and the recognition in earnings of other-than-temporary impairments on our non-agency mortgage-related
securities.
    For a discussion of items that may impact our Investments segment net interest income over time, see
“BUSINESS — Conservatorship and Related Matters — Impact of Conservatorship and Related Actions on Our
Business — Limits on Investment Activity and Our Mortgage-Related Investments Portfolio” and “Net Interest Income.”




                                                           101                                               Freddie Mac
Single-Family Guarantee
      The table below presents the Segment Earnings of our Single-family Guarantee segment.

Table 18 — Segment Earnings and Key Metrics — Single-Family Guarantee(1)
                                                                                                                                                                                                                                  Year Ended December 31,
                                                                                                                                                                                                                               2011          2010          2009
                                                                                                                                                                                                                                     (dollars in millions)
Segment Earnings:
  Net interest income (expense) . . . . . . . . . . . . . . . .                .................................... $                                      (23)                                                                           $     72     $    307
  Provision for credit losses. . . . . . . . . . . . . . . . . . .             . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,294)                                                                            (18,785)     (29,102)
  Non-interest income:
     Management and guarantee income . . . . . . . . . .                       ....................................                                                                                                             3,647        3,635         3,448
     Other non-interest income . . . . . . . . . . . . . . . . .               ....................................                                                                                                             1,216        1,351           721
       Total non-interest income . . . . . . . . . . . . . . . .               ....................................                                                                                                             4,863        4,986         4,169
  Non-interest expense:
     Administrative expenses . . . . . . . . . . . . . . . . . .               ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (888)        (930)        (949)
     REO operations expense . . . . . . . . . . . . . . . . . .                ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (596)        (676)        (287)
     Other non-interest expense . . . . . . . . . . . . . . . .                ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (321)        (578)      (4,854)
       Total non-interest expense . . . . . . . . . . . . . . .                ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   (1,805)      (2,184)      (6,090)
  Segment adjustments(2) . . . . . . . . . . . . . . . . . . . .               ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (699)        (953)          —
  Segment Earnings (loss) before income tax (expense)                          benefit .               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   (9,958)     (16,864)     (30,716)
  Income tax (expense) benefit. . . . . . . . . . . . . . . . .                ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      (42)         608        3,573
  Segment Earnings (loss), net of taxes . . . . . . . . . . .                  ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . (10,000)      (16,256)     (27,143)
Total other comprehensive income (loss), net of taxes .                        ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       30            6           19
Total comprehensive income (loss) . . . . . . . . . . . . . .                  ......                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ (9,970)    $(16,250)    $(27,124)
Reconciliation to GAAP net income (loss):
  Segment Earnings (loss), net of taxes . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $(10,000)    $(16,256)    $(27,143)
  Credit guarantee-related adjustments . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       —            —         5,941
  Tax-related adjustments . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       —            —        (2,080)
    Total reconciling items, net of taxes . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       —            —         3,861
  Net income (loss) attributable to Freddie Mac            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $(10,000)    $(16,256)    $(23,282)
Key metrics — Single-family Guarantee:
Balances and Volume (in billions, except rate):
  Average balance of single-family credit guarantee portfolio and HFA guarantees .                                                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 1,801      $ 1,861      $ 1,848
  Issuance — Single-family credit guarantees(3) . . . . . . . . . . . . . . . . . . . . . . . .                                                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $   305      $   385      $   472
  Fixed-rate products — Percentage of purchases(4) . . . . . . . . . . . . . . . . . . . . .                                                               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    92%          95%          99%
  Liquidation rate — Single-family credit guarantees(5) . . . . . . . . . . . . . . . . . . .                                                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    24%          29%          24%
Management and Guarantee Fee Rate (in bps):
  Contractual management and guarantee fees . . . . . . . . . . . . . . . . . . . . . . . . .                                                              .................                                                     13.7          13.5         13.9
  Amortization of delivery fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                      .................                                                      6.5           6.0          4.8
  Segment Earnings management and guarantee income. . . . . . . . . . . . . . . . . . .                                                                    .................                                                     20.2          19.5         18.7
Credit:
  Serious delinquency rate, at end of period . . . . . . . . . . . . . . . . . . . . . .                                               ......................                                                                  3.58%        3.84%         3.98%
  REO inventory, at end of period (number of properties) . . . . . . . . . . . . .                                                     ......................                                                                  60,535       72,079        45,047
  Single-family credit losses, in bps(6) . . . . . . . . . . . . . . . . . . . . . . . . . .                                           ......................                                                                    72.0         75.8          42.7
Market:
  Single-family mortgage debt outstanding (total U.S. market, in billions)(7)                                                          . . . . . . . . . . . . . . . . . . . . . . $ 10,336                                               $ 10,522     $ 10,866
  30-year fixed mortgage rate(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                           ......................                         4.0%                                                   4.9%         5.1%
(1) For reconciliations of the Segment Earnings line items to the comparable line items in our consolidated financial statements prepared in accordance
    with GAAP, see “NOTE 14: SEGMENT REPORTING — Table 14.2 — Segment Earnings and Reconciliation to GAAP Results.”
(2) For a description of our segment adjustments, see “NOTE 14: SEGMENT REPORTING — Segment Earnings.”
(3) Based on UPB.
(4) Excludes Other Guarantee Transactions.
(5) Represents principal repayments relating to loans underlying Freddie Mac mortgage-related securities and other guarantee commitments including
    those related to our removal of seriously delinquent and modified mortgage loans and balloon/reset mortgage loans out of PC pools.
(6) Calculated as the amount of single-family credit losses divided by the sum of the average carrying value of our single-family credit guarantee
    portfolio and the average balance of our single-family HFA initiative guarantees.
(7) Source: Federal Reserve Flow of Funds Accounts of the United States of America dated December 8, 2011. The outstanding amount for
    December 31, 2011 reflects the balance as of September 30, 2011.
(8) Based on Freddie Mac’s Primary Mortgage Market Survey rate for the last week in the period, which represents the national average mortgage
    commitment rate to a qualified borrower exclusive of any fees and points required by the lender. This commitment rate applies only to financing on
    conforming mortgages with LTV ratios of 80%.

     Segment Earnings (loss) for our Single-family Guarantee segment improved to $(10.0) billion in 2011 compared to
$(16.3) billion in 2010, primarily due to a decline in Segment Earnings provision for credit losses.
     Segment Earnings (loss) for our Single-family Guarantee segment improved to $(16.3) billion in 2010 compared to
$(27.1) billion in 2009, primarily due to a decline in our Segment Earnings provision for credit losses.
                                                                                                                   102                                                                                                                           Freddie Mac
     The table below provides summary information about the composition of Segment Earnings (loss) for this segment
for the years ended December 31, 2011 and 2010.

Table 19 — Segment Earnings Composition — Single-Family Guarantee Segment
                                                                                                                                                                                                                                  Year Ended December 31, 2011
                                                                                                                                                                                                                     Segment Earnings
                                                                                                                                                                                                                     Management and
                                                                                                                                                                                                                    Guarantee Income(1)       Credit Expenses(2)
                                                                                                                                                                                                                               Average                      Average      Net
                                                                                                                                                                                                                    Amount      Rate(3)      Amount          Rate(3)   Amount(4)
                                                                                                                                                                                                                                 (dollars in millions, rates in bps)
Year of origination:(5)
2011 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 362         21.2       $    (56)        3.9      $    306
2010 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      763        22.4           (197)        5.6           566
2009 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      713        20.6           (207)        5.8           506
2008 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      382        23.4           (771)       56.9          (389)
2007 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      368        18.6         (4,365)      239.1        (3,997)
2006 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      227        17.7         (3,439)      252.6        (3,212)
2005 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      257        17.5         (2,125)      136.4        (1,868)
2004 and prior . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      575        18.7         (1,730)       50.9        (1,155)
Total . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $3,647        20.2       $(12,890)       95.4      $ (9,243)
   Administrative expenses . . . . . . . . . . .                                        ...         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                          (888)
   Net interest income (expense) . . . . . . .                                          ...         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                           (23)
   Other non-interest income and expenses,                                              net         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                           154
   Segment Earnings (loss), net of taxes . .                                            ...         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                      $(10,000)

                                                                                                                                                                                                                                  Year Ended December 31, 2010
                                                                                                                                                                                                                     Segment Earnings
                                                                                                                                                                                                                     Management and
                                                                                                                                                                                                                    Guarantee Income(1)       Credit Expenses(2)
                                                                                                                                                                                                                               Average                      Average      Net
                                                                                                                                                                                                                    Amount      Rate(3)      Amount          Rate(3)   Amount(4)
                                                                                                                                                                                                                                 (dollars in millions, rates in bps)
Year of origination:(5)
2010 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 418         23.8       $   (109)        6.2      $    309
2009 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      837        19.3           (367)        8.4           470
2008 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      554        29.5         (2,151)      114.3        (1,597)
2007 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      493        21.2         (7,170)      307.2        (6,677)
2006 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      289        16.5         (5,847)      332.6        (5,558)
2005 . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      313        15.8         (2,644)      132.8        (2,331)
2004 and prior . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      731        16.3         (1,173)       26.1          (442)
Total . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $3,635        19.6       $(19,461)      104.7      $(15,826)
   Administrative expenses . . . . . . . . . . .                                        ...         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                          (930)
   Net interest income (expense) . . . . . . .                                          ...         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                            72
   Other non-interest income and expenses,                                              net         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                           428
   Segment Earnings (loss), net of taxes . .                                            ...         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                                      $(16,256)

(1) Includes amortization of delivery fees of $1.2 billion and $1.1 billion for 2011 and 2010, respectively.
(2) Consists of the aggregate of the Segment Earnings provision for credit losses and Segment Earnings REO operations expense. Historical rates of
    average credit expenses may not be representative of future results.
(3) Calculated as the amount of Segment Earnings management and guarantee income or credit expenses, respectively, divided by the sum of the
    average carrying values of the single-family credit guarantee portfolio and the average balance of our single-family HFA initiative guarantees.
(4) Calculated as Segment Earnings management and guarantee income less credit expenses.
(5) Segment Earnings management and guarantee income is presented by year of guarantee origination, whereas credit expenses are presented based on
    year of loan origination.

      For the years ended December 31, 2011 and 2010, the guarantee-related revenue from mortgage guarantees we issued
after 2008 exceeded the credit-related and administrative expenses associated with these guarantees. We currently believe
our management and guarantee fee rates for guarantee issuances after 2008, when coupled with the higher credit quality
of the mortgages within our new guarantee issuances, will provide management and guarantee fee income, over the long
term, that exceeds our expected credit-related and administrative expenses associated with the underlying loans.
Nevertheless, various factors, such as continued high unemployment rates, further declines in home prices, or negative
impacts of HARP loans originated in recent years (which may not perform as well as other refinance mortgages, due in
part to the high LTV ratios of the loans), could require us to incur expenses on these loans beyond our current
expectations. Our management and guarantee fee income associated with guarantee issuances in 2005 through 2008 has
not been adequate to cover the credit and administrative expenses associated with such loans, primarily due to the high
rate of defaults on the loans originated in those years coupled with a high volume of refinancing since 2008. High levels
of refinancing and delinquency since 2008 have significantly reduced the balance of performing loans from those years
                                                                                                                                                                103                                                                                              Freddie Mac
that remain in our portfolio and consequently reduced management and guarantee income associated with loans originated
in 2005 through 2008 (we do not recognize Segment Earnings management and guarantee income on non-accrual
mortgage loans). We also believe that the management and guarantee fees associated with originations after 2008 will not
be sufficient to offset the future expenses associated with our 2005 to 2008 guarantee issuances for the foreseeable future.
Consequently, we expect to continue reporting net losses for the Single-family Guarantee segment in 2012.
     Segment Earnings management and guarantee income increased slightly in 2011, as compared to 2010, primarily due
to an increase in amortization of delivery fees, partially offset by a lower average balance of the single-family credit
guarantee portfolio during 2011. Segment Earnings management and guarantee income increased slightly in 2010
compared to 2009, primarily due to an increase in amortization of delivery fees. The increase in amortization of delivery
fees in 2011 and 2010 was due to the effect of declining interest rates during these years, which increased both actual
refinance activity and our expectation of future refinancing activity.
     The UPB of the Single-family Guarantee managed loan portfolio was $1.7 trillion at December 31, 2011, compared
to $1.8 trillion and $1.9 trillion at December 31, 2010 and 2009, respectively. The declines in 2011 and 2010 reflect that
the amount of single-family loan liquidations has exceeded new loan purchase and guarantee activity, which we believe is
due, in part, to declines in the amount of single-family mortgage debt outstanding in the market and increased competition
from Ginnie Mae and FHA/VA. Our loan purchase and guarantee activity in 2011 was at the lowest level we have
experienced in the last several years. The liquidation rate on our securitized single-family credit guarantees was
approximately 24%, 29%, and 24% for 2011, 2010, and 2009, respectively. We expect the size of our Single-family
Guarantee managed loan portfolio will decline slightly during 2012.
      Refinance volumes continued to be high during 2011 due to continued low interest rates, and, based on UPB,
represented 78% of our single-family mortgage purchase volume during 2011 compared to 80% of our single-family
mortgage purchase volume during 2010. Relief refinance mortgages comprised approximately 33% and 35% of our total
refinance volume during 2011 and 2010, respectively. Over time, relief refinance mortgages with LTV ratios above 80%
may not perform as well as relief refinance mortgages with LTV ratios of 80% and below because of the continued high
LTV ratios of these loans. There is an increase in borrower default risk as LTV ratios increase, particularly for loans with
LTV ratios above 80%. In addition, relief refinance mortgages may not be covered by mortgage insurance for the full
excess of their UPB over 80%. Approximately 12% of our single-family purchase volume in both 2011 and 2010 was
relief refinance mortgages with LTV ratios above 80%. Relief refinance mortgages of all LTV ratios comprised
approximately 11% and 7% of the UPB in our total single-family credit guarantee portfolio at December 31, 2011 and
2010, respectively.
      On October 24, 2011, FHFA, Freddie Mac, and Fannie Mae announced a series of FHFA-directed changes to HARP
in an effort to attract more eligible borrowers whose monthly payments are current and who can benefit from refinancing
their home mortgages. For more information about our relief refinance mortgage initiative, see “RISK
MANAGEMENT — Credit Risk — Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan
Workouts and the MHA Program.”
      Similar to our purchases in 2009 and 2010, the credit quality of the single-family loans we acquired in 2011
(excluding relief refinance mortgages) is significantly better than that of loans we acquired from 2005 through 2008, as
measured by early delinquency rate trends, original LTV ratios, FICO scores, and the proportion of loans underwritten
with fully documented income. Mortgages originated after 2008, including relief refinance mortgages, represent a growing
proportion of our single-family credit guarantee portfolio. The UPB of loans originated in 2005 to 2008 within our single-
family credit guarantee portfolio continues to decline due to liquidations, which include prepayments, refinancing activity,
foreclosure alternatives, and foreclosure transfers. We currently expect that, over time, the replacement (other than through
relief refinance activity) of the 2005 to 2008 vintages, which have a higher composition of loans with higher-risk
characteristics, should positively impact the serious delinquency rates and credit-related expenses of our single-family
credit guarantee portfolio. However, the rate at which this replacement is occurring slowed beginning in 2010, due
primarily to a decline in the volume of home purchase mortgage originations and delays in the foreclosure process.
     Provision for credit losses for the Single-family Guarantee segment was $12.3 billion, $18.8 billion, and $29.1 billion
in 2011, 2010, and 2009, respectively. The provision for credit losses in 2011 reflects a decline in the rate at which
single-family loans transition into serious delinquency or are modified, but was partially offset by our lowered
expectations for mortgage insurance recoveries, which is due to the continued deterioration in the financial condition of
the mortgage insurance industry in 2011. See “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk” for
further information on our mortgage insurance counterparties. Segment Earnings provision for credit losses declined in
                                                            104                                                 Freddie Mac
2010, compared to 2009, primarily due to a decline in the rate at which delinquent loans transitioned into serious
delinquency, partially offset by a higher volume of loan modifications that were classified as TDRs in 2010.

     We adopted an amendment to the accounting guidance on the classification of loans as TDRs in 2011, which
significantly increases the population of loans we account for and disclose as TDRs. The impact of this change in
guidance on our financial results for 2011 was not significant. We expect that the number of loans that newly qualify as
TDRs in 2012 will remain high, primarily because we anticipate that the majority of our modifications, both completed
and those still in trial periods, will be considered TDRs. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES,” and “NOTE 5: INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS” for additional
information on our TDR loans, including our implementation of changes to the accounting guidance on the classification
of loans as TDRs.

     Single-family credit losses as a percentage of the average balance of the single-family credit guarantee portfolio and
HFA-related guarantees were 72.0 basis points, 75.8 basis points, and 42.7 basis points for 2011, 2010, and 2009,
respectively. Charge-offs, net of recoveries, associated with single-family loans were $12.4 billion, $13.4 billion, and
$7.6 billion in 2011, 2010, and 2009, respectively. See “RISK MANAGEMENT — Credit Risk — Mortgage Credit
Risk — Single-Family Mortgage Credit Risk” for further information on our single-family credit guarantee portfolio,
including credit performance, charge-offs, and our non-performing assets.
     The serious delinquency rate on our single-family credit guarantee portfolio was 3.58%, 3.84%, and 3.98% as of
December 31, 2011, 2010, and 2009, respectively, and declined during 2011 due to a high volume of loan modifications
and foreclosure transfers, as well as a slowdown in new serious delinquencies. Our serious delinquency rate remains high
compared to historical levels, reflecting continued stress in the housing and labor markets and extended foreclosure
timelines. The decline in size of our single-family credit guarantee portfolio in 2011 caused our serious delinquency rate
to be higher than it otherwise would have been because this rate is calculated on a smaller base of loans at year end.

     Segment Earnings other non-interest income was $1.2 billion, $1.4 billion, and $0.7 billion in 2011, 2010, and 2009,
respectively. The decline in 2011, compared to 2010, was primarily due to lower recoveries on loans impaired upon
purchase due to a lower volume of foreclosure transfers and loan payoffs associated with these loans. The increase in
Segment Earnings other non-interest income in 2010 compared to 2009 was primarily due to higher recoveries on loans
impaired upon purchase driven by a higher volume of short sales and foreclosure transfers associated with these loans.

     Segment Earnings REO operations expense was $0.6 billion, $0.7 billion, and $0.3 billion in 2011, 2010, and 2009,
respectively. The decrease in 2011, compared to 2010, was primarily due to the impact of a less significant decline in
home prices in certain geographical areas with significant REO activity resulting in lower write-downs of single-family
REO inventory during 2011, partially offset by lower recoveries on REO properties during 2011. Lower recoveries on
REO properties in 2011, compared to 2010, are primarily due to reduced recoveries from mortgage insurers, in part due to
the continued deterioration in the financial condition of the mortgage insurance industry, and a decline in reimbursements
of losses from seller/servicers associated with repurchase requests on loans on which we have foreclosed. The increase in
Segment Earnings REO operations expense in 2010, compared to 2009, is primarily a result of higher REO property
expenses and holding period write-downs that were partially offset by lower disposition losses and increased recoveries.

     Our REO inventory (measured in number of properties) declined 16% during 2011 due to an increase in the volume
of REO dispositions and slowdowns in REO acquisition volume associated with delays in the foreclosure process.
Dispositions of REO increased 9% in 2011 compared to 2010, based on the number of properties sold. We continued to
experience high REO disposition severity ratios on sales of our REO inventory during 2011. We believe our single-family
REO acquisition volume and single-family credit losses in 2011 have been less than they otherwise would have been due
to delays in the single-family foreclosure process, particularly in states that require a judicial foreclosure process. See
“RISK FACTORS — Operational Risks — We have incurred, and will continue to incur, expenses and we may otherwise
be adversely affected by delays and deficiencies in the foreclosure process” for further information.

     Segment Earnings other non-interest expense was $0.3 billion, $0.6 billion, and $4.9 billion in 2011, 2010, and 2009,
respectively. The decline in 2011, compared to 2010, was primarily due to lower expenses associated with transfers and
terminations of mortgage servicing. The decline in 2010, compared to 2009, was primarily due to a decline in losses on
loans purchased that resulted from changes in accounting guidance for consolidation of VIEs we implemented on
January 1, 2010.
                                                            105                                                Freddie Mac
Multifamily
       The table below presents the Segment Earnings of our Multifamily segment.

Table 20 — Segment Earnings and Key Metrics — Multifamily(1)
                                                                                                                                                                                                                                               Year Ended December 31,
                                                                                                                                                                                                                                            2011          2010          2009
                                                                                                                                                                                                                                                  (dollars in millions)
Segment Earnings:
  Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               ............................ $                                                                                       1,200     $   1,114    $     856
  (Provision) benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . .                                 ............................                                                                                           196           (99)        (574)
  Non-interest income (loss):
    Management and guarantee income . . . . . . . . . . . . . . . . . . . . . .                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          127           101           90
    Net impairment of available-for-sale securities . . . . . . . . . . . . . . .                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         (353)          (96)        (137)
    Derivative gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            3             6          (27)
    Gains (losses) on sale of mortgage loans . . . . . . . . . . . . . . . . . . .                                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          383           343          156
    Gains (losses) on mortgage loans recorded at fair value . . . . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          (83)         (283)        (144)
    Other non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . .                                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          125           177         (474)
       Total non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . .                                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          202           248         (536)
  Non-interest expense:
    Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         (220)         (212)        (221)
    REO operations income (expense) . . . . . . . . . . . . . . . . . . . . . . .                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           11             3          (20)
    Other non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          (69)          (66)         (18)
       Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .                                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         (278)         (275)        (259)
  Segment Earnings (loss) before income tax benefit (expense) . . . . . . .                                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        1,320           988         (513)
  Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           (1)          (26)          —
  Segment Earnings (loss), net of taxes, including noncontrolling interest                                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        1,319           962         (513)
    Less: Net (income) loss — noncontrolling interest . . . . . . . . . . . . .                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           —              3            2
    Segment Earnings (loss), net of taxes . . . . . . . . . . . . . . . . . . . . .                                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        1,319           965         (511)
  Total other comprehensive income, net of taxes . . . . . . . . . . . . . . . .                                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          899         4,075        7,292
  Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $      2,218     $   5,040    $   6,781
Reconciliation to GAAP net income (loss):
  Segment Earnings (loss), net of taxes . . . . .           ....    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $      1,319     $    965     $   (511)
  Credit guarantee-related adjustments(2) . . . . .         ....    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           —            —             7
  Fair value-related adjustments(3) . . . . . . . . .       ....    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           —            —        (3,761)
  Tax-related adjustments(3) . . . . . . . . . . . . .      ....    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           —            —         1,313
    Total reconciling items, net of taxes . . . . .         ....    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           —            —        (2,441)
       Net income (loss) attributable to Freddie            Mac .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $      1,319     $    965     $ (2,952)
Key metrics — Multifamily:
Balances and Volume:
   Average balance of Multifamily loan portfolio. . . . . . . . . . . . . . . . . . . .                                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 83,593       $ 83,163     $ 78,371
   Average balance of Multifamily guarantee portfolio . . . . . . . . . . . . . . . .                                               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 29,861       $ 21,787     $ 16,203
   Average balance of Multifamily investment securities portfolio . . . . . . . . .                                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 61,296       $ 61,332     $ 63,797
   Multifamily new loan purchase and other guarantee commitment volume(4) .                                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 20,325       $ 14,800     $ 16,556
   Multifamily units financed from new volume activity(4) . . . . . . . . . . . . . .                                               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    320,753        233,952      258,072
   Multifamily Other Guarantee Transaction issuance(4) . . . . . . . . . . . . . . .                                                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 11,722       $ 5,694      $ 1,979
Yield and Rate:
   Net interest yield — Segment Earnings basis . . . . . . . . . . . . . . . . . . . . .                                            .........................                                                                                 0.83%         0.77%         0.55%
   Average Management and guarantee fee rate, in bps(5) . . . . . . . . . . . . . .                                                 .........................                                                                                 42.4          50.1          53.3
Credit:
   Delinquency rate:
     Credit-enhanced loans, at period end . . . . . . . . . . . . . . . . . . . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         0.52%         0.85%         1.03%
     Non-credit-enhanced loans, at period end . . . . . . . . . . . . . . . . . . . . .                                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         0.11%         0.12%         0.07%
   Total delinquency rate, at period end(6) . . . . . . . . . . . . . . . . . . . . . . . .                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         0.22%         0.26%         0.20%
   Allowance for loan losses and reserve for guarantee losses, at period end . .                                                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $        545 $        828   $       831
   Allowance for loan losses and reserve for guarantee losses, in bps . . . . . . .                                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         46.4          75.3          82.1
   Credit losses, in bps(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          6.3           9.6           4.4
   REO inventory, at net carrying value . . . . . . . . . . . . . . . . . . . . . . . . . .                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $        133 $        107   $         31
   REO inventory, at period end (number of properties) . . . . . . . . . . . . . . .                                                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           20            14             5

(1) For reconciliations of Segment Earnings line items to the comparable line items in our consolidated financial statements prepared in accordance with
    GAAP, see “NOTE 14: SEGMENT REPORTING — Table 14.2 — Segment Earnings and Reconciliation to GAAP Results.”
(2) Consists primarily of amortization and valuation adjustments pertaining to the guarantee assets and guarantee obligation, which were excluded from
    segment earnings in 2009.
(3) Fair value-related adjustments in 2009 consist principally of the write-down of our investment in LIHTC partnerships in 2009. Tax-related
    adjustments in 2009 consist of the establishment of a partial valuation allowance against our deferred tax assets that are not included in Multifamily
    Segment Earnings.
(4) Excludes our guarantees issued under the HFA initiative.
(5) Represents Multifamily Segment Earnings — management and guarantee income, excluding prepayment and certain other fees, divided by the sum
    of the average balance of the multifamily guarantee portfolio and the average balance of guarantees associated with the HFA initiative, excluding
    certain bonds under the NIBP.
(6) See “RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Multifamily Mortgage Credit Risk” for information on our reported
    multifamily delinquency rate.
(7) Calculated as the amount of multifamily credit losses divided by the sum of the average carrying value of our multifamily loan portfolio and the
    average balance of the multifamily guarantee portfolio, including multifamily HFA initiative guarantees.

                                                                                                                        106                                                                                                                                  Freddie Mac
     Our purchase and guarantee of multifamily loans, excluding HFA-related guarantees, increased approximately 37% to
$20.3 billion for 2011, compared to $14.8 billion and $16.6 billion during 2010 and 2009, respectively. We completed
Other Guarantee Transactions, excluding HFA-related guarantees, of $11.7 billion, $5.7 billion, and $2.0 billion in UPB of
multifamily loans in 2011, 2010, and 2009, respectively. The UPB of the total multifamily portfolio increased to
$176.7 billion at December 31, 2011 from $169.5 billion at December 31, 2010, primarily due to increased issuance of
Other Guarantee Transactions, partially offset by maturities and other repayments of multifamily held-for-investment
mortgage loans. We expect our purchase and guarantee activity to continue to increase, but at a more moderate pace, in
2012.
      Segment Earnings for our Multifamily segment increased to $1.3 billion in 2011, compared to $965 million in 2010,
primarily due to improvement in provision (benefit) for credit losses and lower losses on mortgage loans recorded at fair
value, partially offset by higher security impairments on the CMBS portfolio. Our total comprehensive income for our
Multifamily segment was $2.2 billion in 2011, consisting of: (a) Segment Earnings of $1.3 billion; and (b) $0.9 billion of
total other comprehensive income, which was mainly attributable to changes in fair value of available-for-sale CMBS in
2011.
     Segment Earnings (loss) for our Multifamily segment increased to $965 million for 2010 compared to $(511) million
for 2009, primarily due to increased net interest income and lower provision for credit losses in 2010. Our total
comprehensive income for our Multifamily segment was $5.0 billion in 2010, consisting of: (a) Segment Earnings of
$965 million; and (b) $4.1 billion of total other comprehensive income, primarily resulting from improved fair values on
available-for-sale CMBS. Our total comprehensive income for our Multifamily segment was $6.8 billion in 2009,
consisting of: (a) Segment Earnings (loss) of $(0.5) billion; and (b) $7.3 billion of total other comprehensive income.
     Segment Earnings net interest income increased to $1.2 billion in 2011 from $1.1 billion in 2010, primarily due to
lower funding costs on allocated debt in 2011. Net interest yield was 83 and 77 basis points in 2011 and 2010,
respectively. Segment Earnings net interest income increased $258 million, or 30%, for 2010 compared to 2009, due to
lower funding costs on allocated debt in 2010, which declined principally due to the removal of the LIHTC investments
from the Multifamily segment in the fourth quarter of 2009. See “NOTE 3: VARIABLE INTEREST ENTITIES” for
further information on our LIHTC investments. Net interest income was also positively impacted in 2010 by an increase
in prepayment fees driven by an increase in refinancing in 2010, as compared to 2009. As a result, net interest yield was
77 basis points in 2010, an improvement of 22 basis points from 2009.
     Segment Earnings non-interest income (loss) was $202 million, $248 million, and $(536) million in 2011, 2010, and
2009, respectively. The decline in 2011 was primarily driven by higher security impairments on CMBS, partially offset by
lower losses recognized on mortgage loans recorded at fair value primarily reflecting improving market factors, such as
credit and liquidity. Segment Earnings gains (losses) on mortgage loans recorded at fair value are presented net of changes
in fair value due to changes in interest rates. The improvement in Segment Earnings non-interest income (loss) in 2010,
compared to 2009, was primarily due to the absence of LIHTC partnership losses and higher gains recognized on the sale
of loans through securitization in 2010.
     While our Multifamily Segment Earnings management and guarantee income increased 26% in 2011, compared to
2010, the average rate realized on our guarantee portfolio declined to 42 basis points in 2011 from 50 basis points in
2010. The decline in our average rate in 2011 reflects the impact from our increased volume of Other Guarantee
Transactions, which have lower credit risk associated with our guarantee (and thus we charge a lower rate) relative to
other issued guarantees because these transactions contain significant levels of credit enhancement through subordination.
     Multifamily credit losses as a percentage of the combined average balance of our multifamily loan and guarantee
portfolios were 6.3, 9.6, and 4.4 basis points in 2011, 2010, and 2009, respectively. Our Multifamily segment recognized a
provision (benefit) for credit losses of $(196) million, $99 million, and $574 million in 2011, 2010, and 2009,
respectively. Our loan loss reserves associated with our multifamily mortgage portfolio were $545 million, $828 million,
and $831 million as of December 31, 2011, 2010, and 2009, respectively. The decline in our loan loss reserves in 2011
was driven by positive trends in vacancy rates and effective rents, as well as stabilizing or improved property values.
     The credit quality of the multifamily mortgage portfolio remains strong, as evidenced by low delinquency rates and
credit losses, and we believe reflects prudent underwriting practices. The delinquency rate for loans in the multifamily
mortgage portfolio was 0.22%, 0.26%, and 0.20% as of December 31, 2011, 2010, and 2009, respectively. As of
December 31, 2011, more than half of the multifamily loans that were two or more monthly payments past due, measured
both in terms of number of loans and on a UPB basis, had credit enhancements that we currently believe will mitigate our
expected losses on those loans. We expect our multifamily delinquency rate to remain relatively stable in 2012. See
“RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk — Multifamily Mortgage Credit Risk” for further
                                                           107                                                Freddie Mac
information about our reported multifamily delinquency rates and credit enhancements on multifamily loans. For further
information on delinquencies, including geographical and other concentrations, see “NOTE 16: CONCENTRATION OF
CREDIT AND OTHER RISKS.”

                                  CONSOLIDATED BALANCE SHEETS ANALYSIS
     The following discussion of our consolidated balance sheets should be read in conjunction with our consolidated
financial statements, including the accompanying notes. Also, see “CRITICAL ACCOUNTING POLICIES AND
ESTIMATES” for information concerning certain significant accounting policies and estimates applied in determining our
reported financial position.
Cash and Cash Equivalents, Federal Funds Sold and Securities Purchased Under Agreements to Resell
     Cash and cash equivalents, federal funds sold and securities purchased under agreements to resell, and other liquid
assets discussed in “Investments in Securities — Non-Mortgage-Related Securities,” are important to our cash flow and
asset and liability management, and our ability to provide liquidity and stability to the mortgage market. We use these
assets to help manage recurring cash flows and meet our other cash management needs. We consider federal funds sold to
be overnight unsecured trades executed with commercial banks that are members of the Federal Reserve System.
Securities purchased under agreements to resell principally consist of short-term contractual agreements such as reverse
repurchase agreements involving Treasury and agency securities.
      The short-term assets on our consolidated balance sheets also include those related to our consolidated VIEs, which
are comprised primarily of restricted cash and cash equivalents at December 31, 2011. These short-term assets, related to
our consolidated VIEs, decreased by $9.2 billion from December 31, 2010 to December 31, 2011, primarily due to a
relative decline in the level of refinancing activity.
     Excluding amounts related to our consolidated VIEs, we held $28.4 billion and $37.0 billion of cash and cash
equivalents, $0 billion and $1.4 billion of federal funds sold, and $12.0 billion and $15.8 billion of securities purchased
under agreements to resell at December 31, 2011 and 2010, respectively. The aggregate decrease in these assets was
primarily driven by a decline in funding needs for debt redemptions. In addition, excluding amounts related to our
consolidated VIEs, we held on average $32.4 billion and $33.0 billion of cash and cash equivalents and $13.2 billion and
$19.1 billion of federal funds sold and securities purchased under agreements to resell during the three months and year
ended December 31, 2011, respectively.
     Beginning in the third quarter of 2011, we changed the composition of our portfolio of liquid assets to hold more
cash and overnight investments given the market’s concerns about the potential for a downgrade in the credit ratings of
the U.S. government and the potential that the U.S. would exhaust its borrowing authority under the statutory debt limit.
For more information regarding liquidity management and credit ratings, see “LIQUIDITY AND CAPITAL
RESOURCES — Liquidity.”

Investments in Securities
     The two tables below provide detail regarding our investments in securities as of December 31, 2011, 2010 and 2009.
The tables do not include our holdings of single-family PCs and certain Other Guarantee Transactions as of December 31,
2011 and 2010. For information on our holdings of such securities, see “Table 16 — Composition of Segment Mortgage
Portfolios and Credit Risk Portfolios.”




                                                            108                                                Freddie Mac
Table 21 — Investments in Available-For-Sale Securities
                                                                                                                                                                                                                                  Gross          Gross
                                                                                                                                                                                            Amortized                           Unrealized     Unrealized
                                                                                                                                                                                              Cost                                Gains          Losses       Fair Value
                                                                                                                                                                                                                                      (in millions)
December 31, 2011
Available-for-sale mortgage-related securities:
  Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $ 74,711                            $ 6,429       $    (48)       $ 81,092
  Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         41,347                                 60        (13,408)         27,999
  CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         53,637                              2,574           (548)         55,663
  Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          9,019                                 15         (3,169)          5,865
  Alt-A and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         13,659                                 32         (2,812)         10,879
  Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         19,023                              1,303             (4)         20,322
  Obligations of states and political subdivisions . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          7,782                                108            (66)          7,824
  Manufactured housing . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            820                                  6            (60)            766
  Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            219                                 30             —              249
Total investments in available-for-sale mortgage-related securities                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $220,217                            $10,557       $(20,115)       $210,659
December 31, 2010
Available-for-sale mortgage-related securities:
  Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $ 80,742                            $ 5,142       $ (195)         $ 85,689
  Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         47,916                                  1        (14,056)         33,861
  CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         58,455                              1,551         (1,919)         58,087
  Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         10,726                                 16         (3,853)          6,889
  Alt-A and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         15,561                                 58         (2,451)         13,168
  Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         23,025                              1,348             (3)         24,370
  Obligations of states and political subdivisions . . . . . . . . . . . .                                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          9,885                                 31           (539)          9,377
  Manufactured housing . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            945                                 13            (61)            897
  Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            268                                 28             —              296
Total investments in available-for-sale mortgage-related securities                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $247,523                            $ 8,188       $(23,077)       $232,634
December 31, 2009
Available-for-sale mortgage-related securities:
  Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $215,198                            $ 9,410       $ (1,141)       $223,467
  Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         56,821                                  2        (21,102)         35,721
  CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         61,792                                 15         (7,788)         54,019
  Option ARM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         13,686                                 25         (6,475)          7,236
  Alt-A and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         18,945                                  9         (5,547)         13,407
  Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         34,242                              1,312             (8)         35,546
  Obligations of states and political subdivisions . . . . . . . .                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         11,868                                 49           (440)         11,477
  Manufactured housing . . . . . . . . . . . . . . . . . . . . . . . .                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          1,084                                  1           (174)            911
  Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            320                                 27             —              347
     Total available-for-sale mortgage-related securities . . .                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        413,956                             10,850        (42,675)        382,131
Available-for-sale non-mortgage-related securities:
  Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . .                   .......................                                                                            2,444                                109             —            2,553
     Total available-for-sale non-mortgage-related securities                               .......................                                                                            2,444                                109             —            2,553
Total investments in available-for-sale securities . . . . . . . .                          .......................                                                                         $416,400                            $10,959       $(42,675)       $384,684


Table 22 — Investments in Trading Securities
                                                                                                                                                                                                                                              December 31,
                                                                                                                                                                                                                                     2011        2010           2009
                                                                                                                                                                                                                                              (in millions)
Mortgage-related securities:
  Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $16,047       $13,437       $170,955
  Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 15,165         18,726         34,364
  Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     156           172            185
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     164            31             28
     Total mortgage-related securities . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 31,532         32,366        205,532
Non-mortgage-related securities:
  Asset-backed securities . . . . . . . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     302            44          1,492
  Treasury bills . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     100        17,289         14,787
  Treasury notes . . . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 24,712         10,122             —
  FDIC-guaranteed corporate medium-term notes .                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   2,184           441            439
     Total non-mortgage-related securities . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 27,298         27,896         16,718
Total fair value of investments in trading securities               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $58,830       $60,262       $222,250


Non-Mortgage-Related Securities
    Our investments in non-mortgage-related securities provide an additional source of liquidity. We held investments in
non-mortgage-related securities classified as trading of $27.3 billion and $27.9 billion as of December 31, 2011 and 2010,
                                                                                                                        109                                                                                                                           Freddie Mac
respectively. While balances may fluctuate from period to period, we continue to meet required liquidity and contingency
levels.

Mortgage-Related Securities

     We are primarily a buy-and-hold investor in mortgage-related securities, which consist of securities issued by Fannie
Mae, Ginnie Mae, and other financial institutions. We also invest in our own mortgage-related securities. However, the
single-family PCs and certain Other Guarantee Transactions we purchase as investments are not accounted for as
investments in securities because we recognize the underlying mortgage loans on our consolidated balance sheets through
consolidation of the related trusts.

     The table below provides the UPB of our investments in mortgage-related securities classified as available-for-sale or
trading on our consolidated balance sheets. The table below does not include our holdings of our own single-family PCs
and certain Other Guarantee Transactions. For further information on our holdings of such securities, see “Table 16 —
Composition of Segment Mortgage Portfolios and Credit Risk Portfolios.”

Table 23 — Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets
                                                                                                                     December 31, 2011                           December 31, 2010
                                                                                                             Fixed       Variable                        Fixed       Variable
                                                                                                             Rate         Rate(1)         Total           Rate        Rate(1)         Total
                                                                                                                                              (in millions)
Freddie Mac mortgage-related securities:(2)
  Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . .    ........                        $ 72,795     $    9,753   $ 82,548        $ 79,955       $ 8,118      $ 88,073
  Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    ........                           1,216          1,792      3,008             339         1,756         2,095
         Total Freddie Mac mortgage-related securities .                   ........                          74,011         11,545     85,556          80,294         9,874        90,168
Non-Freddie Mac mortgage-related securities:
  Agency securities:(3)
    Fannie Mae:
       Single-family . . . . . . . . . . . . . . . . . . . . . . . . .     ........                          16,543         15,998        32,541        21,238         18,139         39,377
       Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . .     ........                              52             76           128           228             88            316
    Ginnie Mae:
       Single-family . . . . . . . . . . . . . . . . . . . . . . . . .     ........                             253            104           357           296            117            413
       Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . .     ........                              16             —             16            27             —              27
         Total Non-Freddie Mac agency securities . . . .                   ........                          16,864         16,178        33,042        21,789         18,344         40,133
  Non-agency mortgage-related securities:
    Single-family:(4)
       Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .        336       48,696          49,032          363         53,855          54,218
       Option ARM . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .         —        13,949          13,949           —          15,646          15,646
       Alt-A and other . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .      2,128       14,662          16,790        2,405         16,438          18,843
    CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .     19,735       34,375          54,110       21,401         37,327          58,728
    Obligations of states and political subdivisions(5) . . .              .   .   .   .   .   .   .   .      7,771           22           7,793        9,851             26           9,877
    Manufactured housing . . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .        831          129             960          930            150           1,080
         Total non-agency mortgage-related securities(6)                   .   .   .   .   .   .   .   .     30,801      111,833         142,634       34,950        123,442         158,392
         Total UPB of mortgage-related securities . . . .                  .   .   .   .   .   .   .   .   $121,676     $139,556         261,232     $137,033       $151,660         288,693
Premiums, discounts, deferred fees, impairments of
  UPB and other basis adjustments . . . . . . . . . . . . . . . . . . . . . . .                                                          (12,363)                                    (11,839)
Net unrealized (losses) on mortgage-related securities,
  pre-tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                             (6,678)                                    (11,854)
Total carrying value of mortgage-related securities . . . . . . . . . . . . .                                                        $242,191                                    $265,000

(1) Variable-rate mortgage-related securities include those with a contractual coupon rate that, prior to contractual maturity, is either scheduled to change
    or is subject to change based on changes in the composition of the underlying collateral.
(2) When we purchase REMICs and Other Structured Securities and certain Other Guarantee Transactions that we have issued, we account for these
    securities as investments in debt securities as we are investing in the debt securities of a non-consolidated entity. We do not consolidate our
    resecuritization trusts since we are not deemed to be the primary beneficiary of such trusts. We are subject to the credit risk associated with the
    mortgage loans underlying our Freddie Mac mortgage-related securities. Mortgage loans underlying our issued single-family PCs and certain Other
    Guarantee Transactions are recognized on our consolidated balance sheets as held-for-investment mortgage loans, at amortized cost. See “NOTE 1:
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Investments in Securities” for further information.
(3) Agency securities are generally not separately rated by nationally recognized statistical rating organizations, but have historically been viewed as
    having a level of credit quality at least equivalent to non-agency mortgage-related securities AAA-rated or equivalent.
(4) For information about how these securities are rated, see “Table 29 — Ratings of Non-Agency Mortgage-Related Securities Backed by Subprime,
    Option ARM, Alt-A and Other Loans, and CMBS.”
(5) Consists of housing revenue bonds. Approximately 37% and 50% of these securities held at December 31, 2011 and 2010, respectively, were AAA-
    rated as of those dates, based on the lowest rating available.
(6) Credit ratings for most non-agency mortgage-related securities are designated by no fewer than two nationally recognized statistical rating
    organizations. Approximately 21% and 23% of total non-agency mortgage-related securities held at December 31, 2011 and 2010, respectively, were
    AAA-rated as of those dates, based on the UPB and the lowest rating available.

                                                                                                           110                                                              Freddie Mac
     The table below provides the UPB and fair value of our investments in mortgage-related securities classified as
available-for-sale or trading on our consolidated balance sheets.

Table 24 — Additional Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets
                                                                                                                                                                                          December 31, 2011           December 31, 2010
                                                                                                                                                                                          UPB       Fair Value        UPB       Fair Value
                                                                                                                                                                                                          (in millions)
Agency pass-through securities(1) . . . . . . . . . . . .       ..............................                                                                                          $ 24,283    $ 26,193      $ 31,184      $ 33,459
Agency REMICs and Other Structured Securities:
  Interest-only securities(2) . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         —        2,863            —          3,800
  Principal-only securities(3) . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,569       3,344         4,631         4,067
  Inverse floating-rate securities(4) . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      4,839       6,826         3,512         4,478
  Other Structured Securities . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     85,907      93,805        90,974        96,886
     Total agency securities. . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    118,598     133,031       130,301       142,690
Non-agency securities(5) . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    142,634     109,160       158,392       122,310
Total mortgage-related securities . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $261,232    $242,191      $288,693      $265,000

(1) Represents an undivided beneficial interest in trusts that hold pools of mortgages.
(2) Represents securities where the holder receives only the interest cash flows.
(3) Represents securities where the holder receives only the principal cash flows.
(4) Represents securities where the holder receives interest cash flows that change inversely with the reference rate (i.e. higher cash flows when interest
    rates are low and lower cash flows when interest rates are high). Additionally, these securities receive a portion of principal cash flows associated
    with the underlying collateral.
(5) Includes fair values of $2 million and $5 million of interest-only securities at December 31, 2011 and December 31, 2010, respectively.

     The total UPB of our investments in mortgage-related securities on our consolidated balance sheets decreased from
$288.7 billion at December 31, 2010 to $261.2 billion at December 31, 2011, while the fair value of these investments
decreased from $265.0 billion at December 31, 2010 to $242.2 billion at December 31, 2011. The reduction resulted from
our purchase activity remaining less than liquidations, consistent with our efforts to reduce our mortgage-related
investments portfolio, as described in “BUSINESS — Conservatorship and Related Matters — Impact of Conservatorship
and Related Actions on Our Business — Limits on Investment Activity and Our Mortgage-Related Investments Portfolio.”
The UPB and fair value of inverse floating-rate securities increased as we created new inverse floating-rate securities from
existing mortgage-related securities that were on our consolidated balance sheets. We create inverse floating-rate securities
and other REMICs and sell tranches that are in demand by investors to reduce our asset balance, while conserving value
for the taxpayer. These securities are managed in the overall context of our interest-rate risk management strategy and
framework.
     The table below summarizes our mortgage-related securities purchase activity for 2011, 2010 and 2009. The purchase
activity includes single-family PCs and certain Other Guarantee Transactions issued by trusts that we consolidated.
Effective January 1, 2010, purchases of single-family PCs and certain Other Guarantee Transactions issued by trusts that
we consolidated are recorded as an extinguishment of debt securities of consolidated trusts held by third parties on our
consolidated balance sheets.




                                                                                                                    111                                                                                                   Freddie Mac
Table 25 — Total Mortgage-Related Securities Purchase Activity(1)
                                                                                                                                                                    Year Ended December 31,
                                                                                                                                                                 2011         2010       2009
                                                                                                                                                                          (in millions)
Non-Freddie Mac mortgage-related securities purchased for resecuritization:
  Ginnie Mae Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        ........ $     77                         $      69   $       56
  Non-agency mortgage-related securities purchased for Other Guarantee Transactions(2) . . . . . .                               ........   11,527                             9,579       10,189
    Total non-Freddie Mac mortgage-related securities purchased for resecuritization . . . . . . . .                             ........   11,604                             9,648       10,245
Non-Freddie Mac mortgage-related securities purchased as investments in securities:
Agency securities:
  Fannie Mae:
    Fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .    5,835          —         43,298
    Variable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .    2,297         373         2,697
       Total Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .    8,132         373        45,995
  Ginnie Mae fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .       —           —             27
    Total agency securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .    8,132         373        46,022
Non-agency mortgage-related securities:
  CMBS:
    Fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .       14         —            —
    Variable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .      179         40           —
    Total CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .      193         40           —
  Obligations of states and political subdivisions fixed-rated . . . . . . . . . . . . . . . . . . . . . . . . .                 .   .   .   .   .   .   .   .                  —           180
    Total non-agency mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 .   .   .   .   .   .   .   .      193         40          180
       Total non-Freddie Mac mortgage-related securities purchased as investments in securities                                  .   .   .   .   .   .   .   .    8,325        413       46,202
  Total non-Freddie Mac mortgage-related securities purchased . . . . . . . . . . . . . . . . . . . . . . .                      .   .   .   .   .   .   .   . $ 19,929    $10,061     $ 56,447
Freddie Mac mortgage-related securities purchased:
  Single-family:
    Fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,543                  $40,462     $176,974
    Variable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .................................                                    5,057                      923        5,414
  Multifamily:
    Fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .................................                                      355                      271           —
    Variable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .................................                                      117                      111           —
  Total Freddie Mac mortgage-related securities purchased                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,072                  $41,767     $182,388

(1) Based on UPB. Excludes mortgage-related securities traded but not yet settled.
(2) Purchases in 2011 and 2010 include HFA bonds we acquired and resecuritized under the NIBP. See “NOTE 2: CONSERVATORSHIP AND
    RELATED MATTERS” for further information on this component of the HFA Initiative.
     During the year ended December 31, 2011, we increased our participation in dollar roll transactions, primarily to
support the market and pricing of our PCs. When these transactions involve our consolidated PC trusts, the purchase and
sale represents an extinguishment and issuance of debt securities, respectively, and impacts our net interest income and
recognition of gain or loss on the extinguishment of debt on our consolidated statements of income and comprehensive
income. These transactions can cause short-term fluctuations in the balance of our mortgage-related investments portfolio.
The increase in our purchases of agency securities in 2011, reflected in “Table 25 — Total Mortgage-Related Securities
Purchase Activity” is attributed primarily to these transactions. For more information, see “RISK FACTORS —
Competitive and Market Risks — Any decline in the price performance of or demand for our PCs could have an adverse
effect on the volume and profitability of our new single-family guarantee business.”
Unrealized Losses on Available-For-Sale Mortgage-Related Securities
     At December 31, 2011, our gross unrealized losses, pre-tax, on available-for-sale mortgage-related securities were
$20.1 billion, compared to $23.1 billion at December 31, 2010. The decrease was primarily due to gains on our agency
securities and CMBS as a result of the impact of declining rates and the recognition in earnings of other-than-temporary
impairments on our non-agency mortgage-related securities, partially offset by losses on our single-family non-agency
mortgage-related securities primarily due to widening OAS levels. We believe the unrealized losses related to these
securities at December 31, 2011 were mainly attributable to poor underlying collateral performance, limited liquidity and
large risk premiums in the market for residential non-agency mortgage-related securities. All available-for-sale securities
in an unrealized loss position are evaluated to determine if the impairment is other-than-temporary. See “Total Equity
(Deficit)” and “NOTE 7: INVESTMENTS IN SECURITIES” for additional information regarding unrealized losses on
our available-for-sale securities.




                                                                                           112                                                                                    Freddie Mac
Higher-Risk Components of Our Investments in Mortgage-Related Securities
     As discussed below, we have exposure to subprime, option ARM, interest-only, and Alt-A and other loans as part of
our investments in mortgage-related securities as follows:
    • Single-family non-agency mortgage-related securities: We hold non-agency mortgage-related securities backed by
      subprime, option ARM, and Alt-A and other loans.
    • Single-family Freddie Mac mortgage-related securities: We hold certain Other Guarantee Transactions as part of
      our investments in securities. There are subprime and option ARM loans underlying some of these Other Guarantee
      Transactions. For more information on single-family loans with certain higher-risk characteristics underlying our
      issued securities, see “RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk.”

Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM, and Alt-A Loans
      We categorize our investments in non-agency mortgage-related securities as subprime, option ARM, or Alt-A if the
securities were identified as such based on information provided to us when we entered into these transactions. We have
not identified option ARM, CMBS, obligations of states and political subdivisions, and manufactured housing securities as
either subprime or Alt-A securities. Since the first quarter of 2008, we have not purchased any non-agency mortgage-
related securities backed by subprime, option ARM, or Alt-A loans. The two tables below present information about our
holdings of our available-for-sale non-agency mortgage-related securities backed by subprime, option ARM and Alt-A
loans.




                                                          113                                               Freddie Mac
Table 26 — Non-Agency Mortgage-Related Securities Backed by Subprime First Lien, Option ARM, and Alt-A
           Loans and Certain Related Credit Statistics(1)
                                                                                                                              As of
                                                                                                12/31/2011    9/30/2011     6/30/2011     3/31/2011   12/31/2010
                                                                                                                      (dollars in millions)
UPB:
  Subprime first lien(2) . . . . . . . . . . . . . . . . .       .........................       $48,644      $49,794      $51,070       $52,403      $53,756
  Option ARM . . . . . . . . . . . . . . . . . . . . . .         .........................        13,949       14,351       14,778        15,232       15,646
  Alt-A(3) . . . . . . . . . . . . . . . . . . . . . . . . . .   .........................        14,260       14,643       15,059        15,487       15,917
Gross unrealized losses, pre-tax:(4)
  Subprime first lien(2) . . . . . . . . . . . . . . . . .       .........................       $13,401      $14,132      $13,764       $12,481      $14,026
  Option ARM . . . . . . . . . . . . . . . . . . . . . .         .........................         3,169        3,216        3,099         3,170        3,853
  Alt-A(3) . . . . . . . . . . . . . . . . . . . . . . . . . .   .........................         2,612        2,468        2,171         1,941        2,096
Present value of expected future credit losses:(5)
  Subprime first lien(2) . . . . . . . . . . . . . . . . .       .........................       $ 6,746      $ 5,414      $ 6,487       $ 6,612      $ 5,937
  Option ARM . . . . . . . . . . . . . . . . . . . . . .         .........................         4,251        4,434        4,767         4,993        4,850
  Alt-A(3) . . . . . . . . . . . . . . . . . . . . . . . . . .   .........................         2,235        2,204        2,310         2,401        2,469
Collateral delinquency rate:(6)
  Subprime first lien(2) . . . . . . . . . . . . . . . . .       .........................             42%          42%           42%           44%         45%
  Option ARM . . . . . . . . . . . . . . . . . . . . . .         .........................             44           44            44            44          44
  Alt-A(3) . . . . . . . . . . . . . . . . . . . . . . . . . .   .........................             25           25            26            26          27
Average credit enhancement: (7)
  Subprime first lien(2) . . . . . . . . . . . . . . . . .       .........................             21%          22%           23%           24%         25%
  Option ARM . . . . . . . . . . . . . . . . . . . . . .         .........................              7            8            10            11          12
  Alt-A(3) . . . . . . . . . . . . . . . . . . . . . . . . . .   .........................              7            7             8             8           9
Cumulative collateral loss:(8)
  Subprime first lien(2) . . . . . . . . . . . . . . . . .       .........................             22%          21%           20%           19%         18%
  Option ARM . . . . . . . . . . . . . . . . . . . . . .         .........................             17           16            15            14          13
  Alt-A(3) . . . . . . . . . . . . . . . . . . . . . . . . . .   .........................              8            8             7             7           6
(1) See “Ratings of Non-Agency Mortgage-Related Securities” for additional information about these securities.
(2) Excludes non-agency mortgage-related securities backed exclusively by subprime second liens. Certain securities identified as subprime first lien
    may be backed in part by subprime second lien loans, as the underlying loans of these securities were permitted to include a small percentage of
    subprime second lien loans.
(3) Excludes non-agency mortgage-related securities backed by other loans, which are primarily comprised of securities backed by home equity lines of
    credit.
(4) Represents the aggregate of the amount by which amortized cost, after other-than-temporary impairments, exceeds fair value measured at the
    individual lot level.
(5) Represents our estimate of future contractual cash flows that we do not expect to collect, discounted at the effective interest rate implicit in the
    security at the date of acquisition. This discount rate is only utilized to analyze the cumulative credit deterioration for securities since acquisition and
    may be lower than the discount rate used to measure ongoing other-than-temporary impairment to be recognized in earnings for securities that have
    experienced a significant improvement in expected cash flows since the last recognition of other-than-temporary impairment recognized in earnings.
(6) Determined based on the number of loans that are two monthly payments or more past due that underlie the securities using information obtained
    from a third-party data provider.
(7) Reflects the ratio of the current principal amount of the securities issued by a trust that will absorb losses in the trust before any losses are allocated
    to securities that we own. Percentage generally calculated based on: (a) the total UPB of securities subordinate to the securities we own, divided by
    (b) the total UPB of all of the securities issued by the trust (excluding notional balances). Only includes credit enhancement provided by
    subordinated securities; excludes credit enhancement provided by bond insurance, overcollateralization and other forms of credit enhancement.
(8) Based on the actual losses incurred on the collateral underlying these securities. Actual losses incurred on the securities that we hold are
    significantly less than the losses on the underlying collateral as presented in this table, as non-agency mortgage-related securities backed by
    subprime, option ARM, and Alt-A loans were structured to include credit enhancements, particularly through subordination and other structural
    enhancements.

     For purposes of our cumulative credit deterioration analysis, our estimate of the present value of expected future
credit losses on our total portfolio of non-agency mortgage-related securities (which are set forth in “Table 23 —
Characteristics of Mortgage-Related Securities on Our Consolidated Balance Sheets”) decreased to $14.0 billion at
December 31, 2011 from $14.3 billion at December 31, 2010. All of these amounts have been reflected in our net
impairment of available-for-sale securities recognized in earnings in this period or prior periods. The decrease in the
present value of expected future credit losses was primarily due to the impact of lower interest rates in 2011 resulting in a
benefit from expected structural credit enhancements on the securities. The impact of lower interest rates was partially
offset by the impact of declines in forecasted home prices.




                                                                               114                                                              Freddie Mac
Table 27 — Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM, Alt-A and Other Loans(1)
                                                                                                                  Three Months Ended
                                                                                             12/31/2011    9/30/2011    6/30/2011   3/31/2011    12/31/2010
                                                                                                                      (in millions)
Principal repayments and cash      shortfalls:(2)
  Subprime:
     Principal repayments . . .    .....................................                       $1,159       $1,287      $1,341       $1,361       $1,512
     Principal cash shortfalls .   .....................................                            7            6          10           14            6
  Option ARM:
     Principal repayments . . .    .....................................                       $ 298        $ 318       $ 331        $ 315        $ 347
     Principal cash shortfalls .   .....................................                         103          109         123          100          111
  Alt-A and other:
     Principal repayments . . .    .....................................                       $ 385        $ 425       $ 464        $ 452        $ 537
     Principal cash shortfalls .   .....................................                          80           81          84           81           62
(1) See “Ratings of Non-Agency Mortgage-Related Securities” for additional information about these securities.
(2) In addition to the contractual interest payments, we receive monthly remittances of principal repayments from both the recoveries of liquidated loans
    and, to a lesser extent, voluntary repayments of the underlying collateral of these securities representing a partial return of our investment in these
    securities.

     At the direction of our Conservator, we are working to enforce our rights as an investor with respect to the non-
agency mortgage-related securities we hold, and are engaged in efforts to mitigate losses on our investments in these
securities, in some cases in conjunction with other investors. The effectiveness of our efforts is highly uncertain and any
potential recoveries may take significant time to realize.
     In June 2011, Bank of America Corporation announced that it, BAC Home Loans Servicing, LP, Countrywide
Financial Corporation and Countrywide Home Loans, Inc. entered into a settlement agreement with The Bank of New
York Mellon, as trustee, to resolve certain claims with respect to a number of Countrywide first-lien and second-lien
residential mortgage-related securitization trusts. Bank of America indicated that the settlement is subject to final court
approval and certain other conditions. There can be no assurance that final court approval of the settlement will be
obtained or that all conditions will be satisfied. Bank of America noted that, given the number of investors and the
complexity of the settlement, it is not possible to predict the timing or ultimate outcome of the court approval process,
which could take a substantial period of time. We have investments in certain of these Countrywide securitization trusts
and would expect to benefit from this settlement, if final court approval is obtained. For more information, see
“NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS.”
     On September 2, 2011, FHFA announced that, as Conservator for Freddie Mac and Fannie Mae, it had filed lawsuits
against 17 financial institutions and related defendants alleging: (a) violations of federal securities laws; and (b) in certain
lawsuits, common law fraud in the sale of residential non-agency mortgage-related securities to Freddie Mac and Fannie
Mae. FHFA, as Conservator, filed a similar lawsuit against UBS Americas, Inc. and related defendants on July 27, 2011.
FHFA seeks to recover losses and damages sustained by Freddie Mac and Fannie Mae as a result of their investments in
certain residential non-agency mortgage-related securities issued by these financial institutions.
     Since the beginning of 2007, we have incurred actual principal cash shortfalls of $1.5 billion on impaired non-agency
mortgage-related securities, of which $193 million and $823 million related to the three months and year ended
December 31, 2011, respectively. Many of the trusts that issued non-agency mortgage-related securities we hold were
structured so that realized collateral losses in excess of structural credit enhancements are not passed on to investors until
the investment matures. We currently estimate that the future expected principal and interest shortfalls on non-agency
mortgage-related securities we hold will be significantly less than the fair value declines experienced on these securities.
     The investments in non-agency mortgage-related securities we hold backed by subprime, option ARM, and Alt-A
loans were structured to include credit enhancements, particularly through subordination and other structural
enhancements. Bond insurance is an additional credit enhancement covering some of the non-agency mortgage-related
securities. These credit enhancements are the primary reason we expect our actual losses, through principal or interest
shortfalls, to be less than the underlying collateral losses in the aggregate. It is difficult to estimate the point at which
structural credit enhancements will be exhausted and we will incur actual losses. During the year ended December 31,
2011, we continued to experience the erosion of structural credit enhancements on many securities backed by subprime,
option ARM, and Alt-A loans due to poor performance of the underlying collateral. For more information, see “RISK
MANAGEMENT — Credit Risk — Institutional Credit Risk — Bond Insurers.”




                                                                           115                                                             Freddie Mac
Other-Than-Temporary Impairments on Available-For-Sale Mortgage-Related Securities
    The table below provides information about the mortgage-related securities for which we recognized other-than-
temporary impairments in earnings.

Table 28 — Net Impairment of Available-For-Sale Mortgage-Related Securities Recognized in Earnings
                                                                                                                                          Net Impairment of Available-For-Sale Securities Recognized in Earnings
                                                                                                                                                                  Three Months Ended
                                                                                                                                          12/31/2011    9/30/2011        6/30/2011      3/31/2011     12/31/2010
                                                                                                                                                                       (in millions)
Subprime:(1)
  2006 & 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .       ................                                                  $472           $ 29           $ 67         $ 717           $1,192
  Other years . . . . . . . . . . . . . . . . . . . . . . . . . . . .     ................                                                     8              2              3            17               15
  Total subprime . . . . . . . . . . . . . . . . . . . . . . . . . .      ................                                                   480             31             70           734            1,207
Option ARM:
  2006 & 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .       ................                                                     40             15             43            232            585
  Other years . . . . . . . . . . . . . . . . . . . . . . . . . . . .     ................                                                     19              4             22             49             83
  Total option ARM . . . . . . . . . . . . . . . . . . . . . . .          ................                                                     59             19             65            281            668
Alt-A:
  2006 & 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       22             29             16              15            204
  Other years . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       21             10             15              23            161
  Total Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       43             39             31              38            365
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        3             41              1               2              7
  Total subprime, option ARM, Alt-A and other loans                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      585            130            167           1,055          2,247
CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        8             27            183             135             19
Manufactured housing . . . . . . . . . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        2              4              2               3              4
Total available-for-sale mortgage-related securities . . .                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     $595           $161           $352          $1,193         $2,270

(1) Includes all first and second liens.

     We recorded net impairment of available-for-sale mortgage-related securities recognized in earnings of $595 million
and $2.3 billion during the three months and year ended December 31, 2011, respectively, compared to $2.3 billion and
$4.3 billion during the three months and year ended December 31, 2010, respectively. We recorded these impairments
because our estimate of the present value of expected future credit losses on certain individual securities increased during
the periods. These impairments include $585 million and $1.9 billion of impairments related to securities backed by
subprime, option ARM, and Alt-A and other loans during the three months and year ended December 31, 2011,
respectively, compared to $2.2 billion and $4.2 billion during the three months and year ended December 31, 2010,
respectively. In addition, during the year ended December 31, 2011, these impairments include recognition of the fair
value declines related to certain investments in CMBS of $181 million as an impairment charge in earnings, as we have
the intent to sell these securities. For more information, see “NOTE 7: INVESTMENTS IN SECURITIES — Other-Than-
Temporary Impairments on Available-for-Sale Securities.”
     While it is reasonably possible that collateral losses on our available-for-sale mortgage-related securities where we
have not recorded an impairment charge in earnings could exceed our credit enhancement levels, we do not believe that
those conditions were likely at December 31, 2011. Based on our conclusion that we do not intend to sell our remaining
available-for-sale mortgage-related securities in an unrealized loss position and it is not more likely than not that we will
be required to sell these securities before a sufficient time to recover all unrealized losses and our consideration of other
available information, we have concluded that the reduction in fair value of these securities was temporary at
December 31, 2011 and have recorded these fair value losses in AOCI.
     The credit performance of loans underlying our holdings of non-agency mortgage-related securities has declined
since 2007. This decline has been particularly severe for subprime, option ARM, and Alt-A and other loans. Economic
factors negatively impacting the performance of our investments in non-agency mortgage-related securities include high
unemployment, a large inventory of seriously delinquent mortgage loans and unsold homes, tight credit conditions, and
weak consumer confidence during recent years. In addition, subprime, option ARM, and Alt-A and other loans backing
the securities we hold have significantly greater concentrations in the states that are undergoing the greatest economic
stress, such as California and Florida. Loans in these states undergoing economic stress are more likely to become
seriously delinquent and the credit losses associated with such loans are likely to be higher than in other states.
     We rely on bond insurance, including secondary coverage, to provide credit protection on some of our investments in
non-agency mortgage-related securities. We have determined that there is substantial uncertainty surrounding certain bond
insurers’ ability to pay our future claims on expected credit losses related to our non-agency mortgage-related security
investments. This uncertainty contributed to the impairments recognized in earnings during the years ended December 31,
                                                                                                                  116                                                                            Freddie Mac
2011 and 2010. See “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk — Bond Insurers” and
“NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS — Bond Insurers” for additional information.
      Our assessments concerning other-than-temporary impairment require significant judgment and the use of models,
and are subject to potentially significant change. In addition, changes in the performance of the individual securities and
in mortgage market conditions may also affect our impairment assessments. Depending on the structure of the individual
mortgage-related security and our estimate of collateral losses relative to the amount of credit support available for the
tranches we own, a change in collateral loss estimates can have a disproportionate impact on the loss estimate for the
security. Additionally, servicer performance, loan modification programs and backlogs, bankruptcy reform and other forms
of government intervention in the housing market can significantly affect the performance of these securities, including
the timing of loss recognition of the underlying loans and thus the timing of losses we recognize on our securities.
Impacts related to changes in interest rates may also affect our losses due to the structural credit enhancements on our
investments in non-agency mortgage-related securities. Foreclosure processing suspensions can also affect our losses. For
example, while defaulted loans remain in the trusts prior to completion of the foreclosure process, the subordinate classes
of securities issued by the securitization trusts may continue to receive interest payments, rather than absorbing default
losses. This may reduce the amount of funds available for the tranches we own. Given the extent of the housing and
economic downturn, it is difficult to estimate the future performance of mortgage loans and mortgage-related securities
with high assurance, and actual results could differ materially from our expectations. Furthermore, various market
participants could arrive at materially different conclusions regarding estimates of future cash shortfalls.
      For more information on risks associated with the use of models, see “RISK FACTORS — Operational Risks — We
face risks and uncertainties associated with the internal models that we use for financial accounting and reporting
purposes, to make business decisions, and to manage risks. Market conditions have raised these risks and uncertainties.”
For more information on how delays in the foreclosure process, including delays related to concerns about deficiencies in
foreclosure documentation practices, could adversely affect the values of, and the losses on, the non-agency mortgage-
related securities we hold, see “RISK FACTORS — Operational Risks — We have incurred, and will continue to incur,
expenses and we may otherwise be adversely affected by delays and deficiencies in the foreclosure process.”
     For information regarding our efforts to mitigate losses on our investments in non-agency mortgage-related securities,
see “RISK MANAGEMENT — Credit Risk — Institutional Credit Risk.”

Ratings of Non-Agency Mortgage-Related Securities
     The table below shows the ratings of non-agency mortgage-related securities backed by subprime, option ARM,
Alt-A and other loans, and CMBS held at December 31, 2011 based on their ratings as of December 31, 2011, as well as
those held at December 31, 2010 based on their ratings as of December 31, 2010 using the lowest rating available for
each security.




                                                           117                                                Freddie Mac
Table 29 — Ratings of Non-Agency Mortgage-Related Securities Backed by Subprime, Option ARM,
           Alt-A and Other Loans, and CMBS
                                                                                                                                                                                                                                           Gross       Bond
                                                                                                                                                                                                        Percentage       Amortized      Unrealized   Insurance
Credit Ratings as of December 31, 2011                                                                                                                                                         UPB       of UPB             Cost           Losses    Coverage(1)
                                                                                                                                                                                                                     (dollars in millions)
Subprime loans:
  AAA-rated . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 1,000         2%          $  1,000      $   (115)       $   23
  Other investment grade . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,643        5              2,643          (399)          383
  Below investment grade(2)            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   45,389       93             37,704       (12,894)        1,641
    Total . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 49,032      100%          $ 41,347      $(13,408)       $2,047
Option ARM loans:
  AAA-rated . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $     —        —%           $    —        $     —         $  —
  Other investment grade . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       76        1                76             (8)          76
  Below investment grade(2)            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   13,873       99             8,943         (3,161)          39
    Total . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 13,949      100%          $ 9,019       $ (3,169)       $ 115
Alt-A and other loans:
  AAA-rated . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $    350        2%          $    348      $    (20)       $    6
  Other investment grade . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,237       13              2,260          (371)          310
  Below investment grade(2)            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   14,203       85             11,053        (2,421)        2,139
     Total . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 16,790      100%          $ 13,661      $ (2,812)       $2,455
CMBS:
 AAA-rated . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 25,499       47%          $ 25,540      $     (22)      $   42
 Other investment grade . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   25,421       47             25,394           (346)       1,585
 Below investment grade(2)             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,190        6              2,851           (180)       1,697
   Total . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 54,110      100%          $ 53,785      $    (548)      $3,324
Total subprime, option ARM, Alt-A and other                                        loans, and CMBS:
  AAA-rated . . . . . . . . . . . . . . . . . . . . .                              .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 26,849       20%          $ 26,888      $   (157)       $   71
  Other investment grade . . . . . . . . . . . . .                                 .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   30,377       23             30,373        (1,124)        2,354
  Below investment grade(2) . . . . . . . . . . .                                  .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   76,655       57             60,551       (18,656)        5,516
     Total . . . . . . . . . . . . . . . . . . . . . . . .                         .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   . $133,881      100%          $117,812      $(19,937)       $7,941
Total investments in mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . $261,232
Percentage of subprime, option ARM, Alt-A and other loans, and
  CMBS of total investments in mortgage-related securities . . . . . . . . . . . . . . . . . .             51%
Credit Ratings as of December 31, 2010
Subprime loans:
  AAA-rated . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 2,085         4%          $  2,085      $   (199)       $   31
  Other investment grade . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,407        6              3,408          (436)          449
  Below investment grade(2)            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   48,726       90             42,423       (13,421)        1,789
    Total . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 54,218      100%          $ 47,916      $(14,056)       $2,269
Option ARM loans:
  AAA-rated . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $     —        —%           $     —       $     —         $  —
  Other investment grade . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      139        1                140           (18)         129
  Below investment grade(2)            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   15,507       99             10,586        (3,835)          50
    Total . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 15,646      100%          $ 10,726      $ (3,853)       $ 179
Alt-A and other loans:
  AAA-rated . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 1,293         7%          $  1,301      $    (87)      $     7
  Other investment grade . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    2,761       15              2,765          (362)          368
  Below investment grade(2)            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   14,789       78             11,498        (2,002)        2,443
     Total . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 18,843      100%          $ 15,564      $ (2,451)       $2,818
CMBS:
 AAA-rated . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 28,007       48%          $ 28,071      $    (52)       $   42
 Other investment grade . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   26,777       45             26,740          (676)        1,655
 Below investment grade(2)             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    3,944        7              3,653        (1,191)        1,704
   Total . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 58,728      100%          $ 58,464      $ (1,919)       $3,401
Total subprime, option ARM, Alt-A and other                                        loans, and CMBS:
  AAA-rated . . . . . . . . . . . . . . . . . . . . .                              .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 31,385       21%          $ 31,457      $   (338)       $   80
  Other investment grade . . . . . . . . . . . . .                                 .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   33,084       23             33,053        (1,492)        2,601
  Below investment grade(2) . . . . . . . . . . .                                  .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   82,966       56             68,160       (20,449)        5,986
     Total . . . . . . . . . . . . . . . . . . . . . . . .                         .............                                       .   .   .   .   .   .   .   .   .   .   .   .   .   . $147,435      100%          $132,670      $(22,279)       $8,667
Total investments in mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . $288,693
Percentage of subprime, option ARM, Alt-A and other loans, and
  CMBS of total investments in mortgage-related securities . . . . . . . . . . . . . . . . . .             51%

(1) Represents the amount of UPB covered by bond insurance. This amount does not represent the maximum amount of losses we could recover, as the
    bond insurance also covers interest.
(2) Includes securities with S&P credit ratings below BBB– and certain securities that are no longer rated.




                                                                                                                                                           118                                                                                  Freddie Mac
Mortgage Loans
     The UPB of mortgage loans on our consolidated balance sheet declined to $1.8 trillion as of December 31, 2011
from $1.9 trillion as of December 31, 2010. This decline reflects that the amount of single-family loan liquidations has
exceeded new loan purchase and guarantee activity in 2011, which we believe is due, in part, to declines in the amount of
single-family mortgage debt outstanding in the market and increased competition from Ginnie Mae and FHA/VA. Our
single-family loan purchase and guarantee activity in 2011 was at the lowest level we have experienced in the last several
years. See “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES” for further detail about the mortgage loans
on our consolidated balance sheets.
     The UPB of unsecuritized single-family mortgage loans increased by $22.8 billion to $171.7 billion at December 31,
2011 from $148.9 billion at December 31, 2010, primarily due to our continued removal of seriously delinquent and
modified loans from the mortgage pools underlying our PCs. Based on the amount of the recorded investment of these
loans, approximately $72.4 billion, or 4.2%, of the single-family mortgage loans on our consolidated balance sheet as of
December 31, 2011 were seriously delinquent, as compared to $84.2 billion, or 4.7%, as of December 31, 2010. This
decline was primarily due to modifications, foreclosure transfers, and short sale activity. The majority of these seriously
delinquent loans are unsecuritized, and were removed by us from our PC trusts. As guarantor, we have the right to remove
mortgages that back our PCs from the underlying loan pools under certain circumstances. See “NOTE 5:
INDIVIDUALLY IMPAIRED AND NON-PERFORMING LOANS” for more information on our removal of single-family
loans from PC trusts. We expect that our holdings of unsecuritized single-family loans will continue to increase in 2012
due to the recent revisions to HARP, which will result in our purchase of mortgages with LTV ratios greater than 125%,
as we have not yet implemented a securitization process for such loans. See “RISK MANAGEMENT — Credit Risk —
Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program” for
additional information on HARP.
     The UPB of unsecuritized multifamily mortgage loans was $82.3 billion at December 31, 2011 and $85.9 billion at
December 31, 2010. Our multifamily loan activity in 2011 primarily consisted of purchases of loans intended for
securitization and subsequently sold through Other Guarantee Transactions. We expect to continue to purchase and
subsequently securitize multifamily loans, which supports liquidity for the multifamily market and affordability for
multifamily rental housing, as our primary multifamily business strategy.
     We maintain an allowance for loan losses on mortgage loans that we classify as held-for-investment on our
consolidated balance sheets. Our reserve for guarantee losses is associated with Freddie Mac mortgage-related securities
backed by multifamily loans, certain single-family Other Guarantee Transactions, and other guarantee commitments, for
which we have incremental credit risk. Collectively, we refer to our allowance for loan losses and our reserve for
guarantee losses as our loan loss reserves. Our loan loss reserves were $39.5 billion and $39.9 billion at December 31,
2011 and 2010, respectively, including $38.9 billion and $39.1 billion, respectively, related to single-family loans. At
December 31, 2011 and 2010, our loan loss reserves, as a percentage of our total mortgage portfolio, excluding non-
Freddie Mac securities, was 2.1% and 2.0%, respectively, and as a percentage of the UPB associated with our non-
performing loans was 32.0% and 33.7%, respectively. See “RISK MANAGEMENT — Credit Risk — Mortgage Credit
Risk — Loan Loss Reserves” for more information about our loan loss reserves.
     The table below summarizes our purchase and guarantee activity in mortgage loans. This activity consists of:
(a) mortgage loans underlying consolidated single-family PCs issued in the period (regardless of whether such securities
are held by us or third parties); (b) single-family and multifamily mortgage loans purchased, but not securitized, in the
period; and (c) mortgage loans underlying our mortgage-related financial guarantees issued in the period, which are not
consolidated on our balance sheets.




                                                           119                                                Freddie Mac
Table 30 — Mortgage Loan Purchase and Other Guarantee Commitment Activity(1)
                                                                                                                                          Year Ended December 31,
                                                                                                                             2011                    2010               2009
                                                                                                                          UPB       % of        UPB          % of   UPB        % of
                                                                                                                         Amount     Total     Amount         Total Amount      Total
                                                                                                                                             (dollars in millions)
Mortgage loan purchases and guarantee issuances:
 Single-family:
    30-year or more amortizing fixed-rate . . . . . . . . . . . . . . . . . . . . . .             .   .   .   .   .   . $194,746     57% $258,621         64% $392,291          80%
    20-year amortizing fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   21,378      6    23,852          6    11,895           2
    15-year amortizing fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   78,543     23    83,025         21    64,590          13
    Adjustable-rate(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   25,685      8    16,534          4     2,809           1
    Interest-only(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .       —      —        909          1       845           1
    HFA bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .       —      —      2,469          1       802           1
    FHA/VA and other governmental . . . . . . . . . . . . . . . . . . . . . . . . .               .   .   .   .   .   .      441      1       968          1     2,118           1
       Total single-family(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   . 320,793      94   386,378         96   475,350          97
 Multifamily(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   20,325      6    15,372          4    16,571           3
         Total mortgage loan purchases and other guarantee commitment
            activity(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   . . . . . . $341,118              100% $401,750        100% $491,921         100%
Percentage of mortgage purchases and other guarantee commitment activity with
  credit enhancements(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      8%                    9%                   8%
(1) Based on UPB. Excludes mortgage loans traded but not yet settled. Excludes the removal of seriously delinquent loans and balloon/reset mortgages
    out of PC trusts. Includes other guarantee commitments associated with mortgage loans. See endnote (5) for further information.
(2) Includes amortizing ARMs with 1-, 3-, 5-, 7-, and 10-year initial fixed-rate periods. We did not purchase any option ARM loans during the years
    ended December 31, 2011, 2010, or 2009.
(3) Represents loans where the borrower pays interest only for a period of time before the borrower begins making principal payments. Includes both
    fixed-rate and variable-rate interest-only loans.
(4) Includes $27.7 billion, $23.9 billion, and $26.3 billion of mortgage loans in excess of $417,000, which we refer to as conforming jumbo mortgages,
    for the years ended December 31, 2011, 2010, and 2009 respectively.
(5) Includes issuances of other guarantee commitments on single-family loans of $4.4 billion, $5.7 billion, and $2.4 billion and issuances of other
    guarantee commitments on multifamily loans of $1.0 billion, $1.7 billion, and $0.5 billion during the years ended December 31, 2011, 2010, and
    2009, respectively, which include our unsecuritized guarantees of HFA bonds under the TCLFP in 2010 and 2009.
(6) See “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES — Credit Protection and Other Forms of Credit Enhancement” for further
    details on credit enhancement of mortgage loans in our multifamily mortgage and single-family credit guarantee portfolios.
     See “RISK MANAGEMENT — Credit Risk — Mortgage Credit Risk” and “NOTE 16: CONCENTRATION OF
CREDIT AND OTHER RISKS — Table 16.2 — Certain Higher-Risk Categories in the Single-Family Credit Guarantee
Portfolio” for information about mortgage loans in our single-family credit guarantee portfolio that we believe have
higher-risk characteristics.

Derivative Assets and Liabilities, Net
     The composition of our derivative portfolio changes from period to period as a result of derivative purchases,
terminations, or assignments prior to contractual maturity, and expiration of the derivatives at their contractual maturity.
We classify net derivative interest receivable or payable, trade/settle receivable or payable, and cash collateral held or
posted on our consolidated balance sheets in derivative assets, net and derivative liabilities, net. See “NOTE 11:
DERIVATIVES” for additional information regarding our derivatives.
     The table below shows the fair value for each derivative type, the weighted average fixed rate of our pay-fixed and
receive-fixed swaps, and the maturity profile of our derivative positions reconciled to the amounts presented on our
consolidated balance sheets as of December 31, 2011. A positive fair value in the table below for each derivative type is
the estimated amount, prior to netting by counterparty, that we would be entitled to receive if the derivatives of that type
were terminated. A negative fair value for a derivative type is the estimated amount, prior to netting by counterparty, that
we would owe if the derivatives of that type were terminated.




                                                                                         120                                                                       Freddie Mac
Table 31 — Derivative Fair Values and Maturities
                                                                                                                                                           December 31, 2011
                                                                                                                            Notional or                                        Fair Value(1)
                                                                                                                            Contractual   Total Fair   Less than       1 to 3       Greater than 3    In Excess
                                                                                                                             Amount(2)     Value(3)     1 Year         Years      and up to 5 Years   of 5 Years
                                                                                                                                                           (dollars in millions)
Interest-rate swaps:
   Receive-fixed:
     Swaps . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $195,716      $ 10,651     $      22  $ 390              $ 2,054          $ 8,185
        Weighted average fixed rate(4) .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                   1.17%   1.03%               2.26%            3.35%
     Forward-starting swaps(5) . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      16,092        2,239            —       —                   —             2,239
        Weighted average fixed rate(4) .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                     —%      —%                  —%             3.96%
        Total receive-fixed . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    211,808        12,890            22     390               2,054           10,424
   Basis (floating to floating) . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      2,750            (2)           —       (6)                  4               —
   Pay-fixed:
     Swaps . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    276,564       (31,565)          (62)     (1,319)          (6,108)         (24,076)
        Weighted average fixed rate(4) .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                   1.59%       2.20%            3.13%            3.84%
     Forward-starting swaps(5) . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      12,771       (2,923)           —           —                —            (2,923)
        Weighted average fixed rate(4) .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                     —%          —%               —%             5.16%
        Total pay-fixed . . . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    289,335       (34,488)          (62)     (1,319)          (6,108)         (26,999)
   Total interest-rate swaps . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    503,893       (21,600)          (40)       (935)          (4,050)         (16,575)
Option-based:
   Call swaptions
     Purchased . . . . . . . . . . . . . . . .      ..................                                                         76,275       12,975         5,348       3,895              816            2,916
     Written. . . . . . . . . . . . . . . . . .     ..................                                                         27,525       (2,932)         (118)     (2,556)            (258)              —
   Put swaptions
     Purchased . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     70,375           638         24           49               166               399
     Written. . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        500            (2)        (2)          —                 —                 —
   Other option-based derivatives(6) . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     38,549         2,254         —            —                 —              2,254
     Total option-based . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    213,224        12,933      5,252        1,388               724             5,569
Futures . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     41,281             5          5           —                 —                 —
Foreign-currency swaps . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      1,722            97         34           63                —                 —
Commitments(7) . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     14,318           (56)       (56)          —                 —                 —
Swap guarantee derivatives. . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      3,621           (37)        —            (1)               (1)              (35)
   Subtotal . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    778,059        (8,658)    $5,195       $ 515            $(3,327)         $(11,041)
Credit derivatives . . . . . . . . . . . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .     10,190           (4)
  Subtotal . . . . . . . . . . . . . . . . . . . . . . .            .   .   .   .   .   .   .   .   .   .   .   .   .   .    788,249       (8,662)
Derivative interest receivable (payable), net                       .   .   .   .   .   .   .   .   .   .   .   .   .   .                  (1,069)
Trade/settle receivable (payable), net . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .                       1
Derivative cash collateral (held) posted, net                       .   .   .   .   .   .   .   .   .   .   .   .   .   .                   9,413
  Total . . . . . . . . . . . . . . . . . . . . . . . . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   $788,249      $ (317)

(1) Fair value is categorized based on the period from December 31, 2011 until the contractual maturity of the derivative.
(2) Notional or contractual amounts are used to calculate the periodic settlement amounts to be received or paid and generally do not represent actual
    amounts to be exchanged. Notional or contractual amounts are not recorded as assets or liabilities on our consolidated balance sheets.
(3) The value of derivatives on our consolidated balance sheets is reported as derivative assets, net and derivative liabilities, net, and includes derivative
    interest receivable or (payable), net, trade/settle receivable or (payable), net and derivative cash collateral (held) or posted, net.
(4) Represents the notional weighted average rate for the fixed leg of the swaps.
(5) Represents interest-rate swap agreements that are scheduled to begin on future dates ranging from less than one year to thirteen years as of
    December 31, 2011.
(6) Primarily includes purchased interest-rate caps and floors.
(7) Commitments include: (a) our commitments to purchase and sell investments in securities; (b) our commitments to purchase mortgage loans; and
    (c) our commitments to purchase and extinguish or issue debt securities of our consolidated trusts.
     At December 31, 2011, the net fair value of our total derivative portfolio was $(317) million, as compared to
$(1.1) billion at December 31, 2010. During the year ended December 31, 2011, the fair value of our total derivative
portfolio increased primarily due to additional cash collateral we posted to our counterparties during this period, partially
offset by the impact of declines in interest rates. See “NOTE 11: DERIVATIVES” for the notional or contractual amounts
and related fair values of our total derivative portfolio by product type at December 31, 2011 and 2010, as well as
derivative collateral posted and held.




                                                                                                                               121                                                               Freddie Mac
       The table below summarizes the changes in derivative fair values.

Table 32 — Changes in Derivative Fair Values
                                                                                                                                                                                                                                                  2011(1)      2010(2)
                                                                                                                                                                                                                                                     (in millions)
Beginning balance, at January 1 — Net asset (liability) . . . . . . .              . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(6,560)                                                                                   $(2,267)
  Net change in:
    Commitments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     ........................................                                                                                                                           (36)         (31)
    Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ........................................                                                                                                                           (11)          (8)
    Swap guarantee derivatives . . . . . . . . . . . . . . . . . . . . . .         ........................................                                                                                                                            (1)          (2)
  Other derivatives:(4)
    Changes in fair value . . . . . . . . . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . (3,383)       (3,508)
    Fair value of new contracts entered into during the period(5)                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     594          444
    Contracts realized or otherwise settled during the period . .                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     735       (1,188)
Ending balance, at December 31 — Net asset (liability) . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $(8,662)     $(6,560)

(1) Refer to “Table 31 — Derivative Fair Values and Maturities” for a reconciliation of net fair value to the amounts presented on our consolidated
    balance sheets as of December 31, 2011.
(2) At December 31, 2010, fair value in this table excludes derivative interest receivable or (payable), net of $(820) million, trade/settle receivable or
    (payable), net of $1 million, and derivative cash collateral posted, net of $6.3 billion.
(3) Commitments include: (a) our commitments to purchase and sell investments in securities; (b) our commitments to purchase mortgage loans; and
    (c) our commitments to purchase and extinguish or issue debt securities of our consolidated trusts.
(4) Includes fair value changes for interest-rate swaps, option-based derivatives, futures, and foreign-currency swaps.
(5) Consists primarily of cash premiums paid or received on options.

     See “CONSOLIDATED RESULTS OF OPERATIONS — Non-Interest Income (Loss) — Derivative Gains (Losses)”
for a description of gains (losses) on our derivative positions.

REO, Net
     We acquire properties, which are recorded as REO assets on our consolidated balance sheets, typically as a result of
borrower default on mortgage loans that we own, or for which we have issued our financial guarantee. The balance of our
REO, net, declined to $5.7 billion at December 31, 2011 from $7.1 billion at December 31, 2010. We believe the volume
of our single-family REO acquisitions in 2011 was less than it otherwise would have been due to delays in the foreclosure
process, particularly in states that require a judicial foreclosure process. While we expect the delays to ease in 2012, we
also expect these delays will remain above historical levels. We also expect our REO inventory to remain at elevated
levels, as we have a large inventory of seriously delinquent loans in our single-family credit guarantee portfolio, many of
which will likely complete the foreclosure process and transition to REO during 2012 as our servicers work through their
foreclosure-related issues. To the extent a large volume of loans completes the foreclosure process in a short period of
time, the resulting REO inventory could have a negative impact on the housing market. See “RISK MANAGEMENT —
Credit Risk — Mortgage Credit Risk — Non-Performing Assets” for additional information about our REO activity.

Deferred Tax Assets, Net
     We recognize deferred tax assets and liabilities based upon the expected future tax consequences of existing
temporary differences between the financial reporting and the tax reporting basis of assets and liabilities using enacted
statutory tax rates. We record valuation allowances to reduce our net deferred tax assets when it is more likely than not
that a tax benefit will not be realized. The realization of our net deferred tax assets is dependent upon the generation of
sufficient taxable income or, with respect to the portion of our deferred tax assets related to our available-for-sale
securities, our intent and ability to hold such securities to the recovery of any temporary unrealized losses. On a quarterly
basis, we consider all evidence currently available, both positive and negative, in determining whether, based on the
weight of that evidence, the net deferred tax assets will be realized or whether a valuation allowance is necessary.
     After evaluating all available evidence, including our losses, the events and developments related to our
conservatorship, volatility in the economy, and related difficulty in forecasting future profit levels, we continue to record a
valuation allowance on a portion of our net deferred tax assets as of December 31, 2011 and 2010. Our valuation
allowance increased by $2.3 billion during 2011 to $35.7 billion, primarily attributable to an increase in temporary
differences during the period. As of December 31, 2011, after consideration of the valuation allowance, we had a net
deferred tax asset of $3.5 billion, primarily representing the tax effect of unrealized losses on our available-for-sale
securities. We believe the deferred tax asset related to these unrealized losses is more likely than not to be realized
because of our assertion that we have the intent and ability to hold our available-for-sale securities until any temporary
unrealized losses are recovered.
                                                                                               122                                                                                                                                                   Freddie Mac
IRS Examinations
     Prior to 2011, the IRS completed its examinations of tax years 1998 to 2007. We received Statutory Notices from the
IRS assessing $3.0 billion of additional income taxes and penalties for the 1998 to 2007 tax years, principally related to
questions of timing and potential penalties regarding our tax accounting method for certain hedging transactions. We filed
a petition with the U.S. Tax Court on October 22, 2010 in response to the 1998 to 2005 Statutory Notices. We paid the
tax assessed in the Statutory Notice received for the years 2006 to 2007 of $36 million and will seek a refund through the
administrative process, which could include filing suit in Federal District Court. We believe appropriate reserves have
been provided for settlement on reasonable terms. For additional information, see “NOTE 13: INCOME TAXES.”

Other Assets
     Other assets consist of the guarantee asset related to non-consolidated trusts and other guarantee commitments,
accounts and other receivables, and other miscellaneous assets. Other assets decreased to $10.5 billion as of December 31,
2011 from $10.9 billion as of December 31, 2010 primarily because of a decrease in other receivables related to mortgage
insurers and credit enhancements due to a decline in default volume. See “NOTE 19: SELECTED FINANCIAL
STATEMENT LINE ITEMS” for additional information.

Total Debt, Net
     PCs and Other Guarantee Transactions issued by our consolidated trusts and held by third parties are recognized as
debt securities of consolidated trusts held by third parties on our consolidated balance sheets. Debt securities of
consolidated trusts held by third parties represents our liability to third parties that hold beneficial interests in our
consolidated trusts. The debt securities of our consolidated trusts may be prepaid without penalty at any time.
     Other debt consists of unsecured short-term and long-term debt securities we issue to third parties to fund our
business activities. It is classified as either short-term or long-term based on the contractual maturity of the debt
instrument. See “LIQUIDITY AND CAPITAL RESOURCES” for a discussion of our management activities related to
other debt.
     The table below reconciles the par value of other debt and the UPB of debt securities of consolidated trusts held by
third parties to the amounts shown on our consolidated balance sheets.

Table 33 — Reconciliation of the Par Value and UPB to Total Debt, Net
                                                                                                                                                                                                                                             December 31,
                                                                                                                                                                                                                                          2011               2010
                                                                                                                                                                                                                                               (in millions)
Total debt:
  Other debt:
     Par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 674,314       $ 728,217
     Unamortized balance of discounts and premiums(1) . . . .                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (13,891)        (14,529)
     Hedging-related and other basis adjustments(2) . . . . . . .                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         123             252
       Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     660,546         713,940
  Debt securities of consolidated trusts held by third parties:
     UPB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    1,452,476       1,517,001
     Unamortized balance of discounts and premiums . . . . . .                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       18,961          11,647
       Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    1,471,437       1,528,648
  Total debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $2,131,983      $2,242,588

(1) Primarily represents unamortized discounts on zero-coupon debt.
(2) Primarily represents deferrals related to debt instruments that were in hedge accounting relationships, and changes in the fair value attributable to
    instrument-specific interest-rate and credit risk related to foreign-currency denominated debt.




                                                                                                       123                                                                                                                                        Freddie Mac
      The table below summarizes our other short-term debt.
Table 34 — Other Short-Term Debt
                                                                                                                   2011
                                                                                                                    Average Outstanding
                                                                                 December 31,                          During the Year                 Maximum
                                                                                           Weighted                                 Weighted          Balance, Net
                                                                                           Average                                   Average         Outstanding at
                                                                                   (1)
                                                                       Balance, Net    Effective Rate(2)     Balance, Net (3)
                                                                                                                                 Effective Rate(4)   Any Month End
                                                                                                           (dollars in millions)
Reference Bills» securities and discount notes . . .          ......    $161,149              0.11%           $181,209                0.17%            $196,126
Medium-term notes . . . . . . . . . . . . . . . . . . . . .   ......         250              0.24                 826                0.23                2,564
Federal funds purchased and securities sold under
  agreements to repurchase . . . . . . . . . . . . . . . .    ......          —                 —                      13             0.16                    —
  Other short-term debt . . . . . . . . . . . . . . . . . .   ......    $161,399              0.11

                                                                                                                   2010
                                                                                                                    Average Outstanding
                                                                                 December 31,                          During the Year                 Maximum
                                                                                           Weighted                                 Weighted          Balance, Net
                                                                                           Average                                   Average         Outstanding at
                                                                       Balance, Net(1) Effective Rate(2)     Balance, Net(3)     Effective Rate(4)   Any Month End
                                                                                                           (dollars in millions)
Reference Bills» securities and discount notes . . .          ......    $194,742              0.24%           $213,465                0.25%            $240,037
Medium-term notes . . . . . . . . . . . . . . . . . . . . .   ......       2,364              0.31               1,955                0.34                3,661
Federal funds purchased and securities sold under
  agreements to repurchase . . . . . . . . . . . . . . . .    ......          —                 —                      72             0.30                    —
  Other short-term debt . . . . . . . . . . . . . . . . . .   ......    $197,106              0.25

                                                                                                                   2009
                                                                                                                    Average Outstanding
                                                                                 December 31,                          During the Year                 Maximum
                                                                                           Weighted                                 Weighted          Balance, Net
                                                                                           Average                                   Average         Outstanding at
                                                                                   (1)
                                                                       Balance, Net    Effective Rate(2)     Balance, Net (3)
                                                                                                                                 Effective Rate(4)   Any Month End
                                                                                                           (dollars in millions)
Reference Bills» securities and discount notes . . .          ......    $227,611              0.26%           $261,020                0.70%            $340,307
Medium-term notes . . . . . . . . . . . . . . . . . . . . .   ......      10,560              0.69              19,372                1.10               34,737
Federal funds purchased and securities sold under
  agreements to repurchase . . . . . . . . . . . . . . . .    ......          —                 —                      33             0.29                    —
  Other short-term debt . . . . . . . . . . . . . . . . . .   ......    $238,171              0.28

(1) Represents par value, net of associated discounts and premiums, of which $0.2 billion, $0.9 billion, and $0.5 billion of short-term debt represents the
    fair value of debt securities with the fair value option elected at December 31, 2011, 2010, and 2009, respectively.
(2) Represents the approximate weighted average effective rate for each instrument outstanding at the end of the period, which includes the amortization
    of discounts or premiums and issuance costs.
(3) Represents par value, net of associated discounts, premiums, and issuance costs. Issuance costs are reported in the other assets caption on our
    consolidated balance sheets.
(4) Represents the approximate weighted average effective rate during the period, which includes the amortization of discounts or premiums and
    issuance costs.




                                                                               124                                                                   Freddie Mac
    The table below presents the UPB for Freddie Mac issued mortgage-related securities by the underlying mortgage
product type.

Table 35 — Freddie Mac Mortgage-Related Securities(1)
                                                                       December 31, 2011                               December 31, 2010                December 31, 2009
                                                            Issued by      Issued by                      Issued by        Issued by
                                                           Consolidated Non-Consolidated                 Consolidated Non-Consolidated
                                                              Trusts         Trusts            Total        Trusts           Trusts          Total            Total
                                                                                                            (in millions)
Single-family:
  30-year or more amortizing fixed-rate .            .   . $1,123,105       $       —      $1,123,105 $1,213,448           $       —       $1,213,448      $1,318,053
  20-year amortizing fixed-rate . . . . . .          .   .     68,584               —          68,584     65,210                   —           65,210          57,705
  15-year amortizing fixed-rate . . . . . .          .   .    252,563               —         252,563    248,702                   —          248,702         241,721
  Adjustable-rate(2) . . . . . . . . . . . . . .     .   .     69,402               —          69,402     61,269                   —           61,269          68,428
  Interest-only(3) . . . . . . . . . . . . . . . .   .   .     59,007               —          59,007     79,835                   —           79,835         131,529
  FHA/VA and other governmental . . . .              .   .      3,267               —           3,267      3,369                   —            3,369           1,343
     Total single-family . . . . . . . . . . . .     .   . 1,575,928                —       1,575,928 1,671,833                    —        1,671,833       1,818,779
Multifamily . . . . . . . . . . . . . . . . . . .    .   .         —             4,496          4,496         —                 4,603           4,603           5,085
     Total single-family and multifamily .           .   . 1,575,928             4,496      1,580,424 1,671,833                 4,603       1,676,436       1,823,864
Other Guarantee Transactions:
  HFA bonds:(4)
     Single-family . . . . . . . . . . . . . . .     ..            —             6,118           6,118            —             6,168           6,168           3,113
     Multifamily . . . . . . . . . . . . . . . .     ..            —               966             966            —             1,173           1,173             391
     Total HFA bonds . . . . . . . . . . . . .       ..            —             7,084           7,084            —             7,341           7,341           3,504
  Other:
     Single-family(5) . . . . . . . . . . . . . .    ..        12,877            3,838          16,715       15,806             4,243         20,049           23,841
     Multifamily . . . . . . . . . . . . . . . .     ..            —            19,682          19,682           —              8,235          8,235            2,655
     Total Other Guarantee Transactions .            ..        12,877           23,520          36,397       15,806            12,478         28,284           26,496
REMICs and Other Structured Securities
  backed by Ginnie Mae Certificates(6) .             ..            —              779              779            —              857             857              949
Total Freddie Mac Mortgage-Related
  Securities . . . . . . . . . . . . . . . . . . .   . . $1,588,805         $35,879        $1,624,684 $1,687,639           $25,279         $1,712,918      $1,854,813
Less: Repurchased Freddie Mac Mortgage-
  Related Securities(7) . . . . . . . . . . . . . .  (136,329)                                             (170,638)
Total UPB of debt securities of consolidated
  trusts held by third parties . . . . . . . . . . $1,452,476                                            $1,517,001

(1) 2011 and 2010 amounts are based on UPB of the securities and excludes mortgage-related debt traded, but not yet settled. 2009 amounts are based
    on UPB of the mortgage loans underlying our mortgage-related financial guarantees.
(2) Includes $1.2 billion, $1.3 billion, and $1.4 billion in UPB of option ARM mortgage loans as of December 31, 2011, 2010, and 2009, respectively.
    See endnote (5) for additional information on option ARM loans that back our Other Guarantee Transactions.
(3) Represents loans where the borrower pays interest only for a period of time before the borrower begins making principal payments. Includes both
    fixed- and variable-rate interest-only loans.
(4) Consists of bonds we acquired and resecuritized under the NIBP.
(5) Backed by non-agency mortgage-related securities that include prime, FHA/VA, and subprime mortgage loans and also include $7.3 billion,
    $8.4 billion, and $9.6 billion in UPB of securities backed by option ARM mortgage loans at December 31, 2011, 2010, and 2009, respectively.
(6) Backed by FHA/VA loans.
(7) Represents the UPB of repurchased Freddie Mac mortgage-related securities that are consolidated on our balance sheets and includes certain
    remittance amounts associated with our security trust administration that are payable to third-party mortgage-related security holders. Our holdings
    of non-consolidated Freddie Mac mortgage-related securities are presented in “Table 23 — Characteristics of Mortgage-Related Securities on Our
    Consolidated Balance Sheets.”
    Excluding Other Guarantee Transactions, the percentage of amortizing fixed-rate single-family loans underlying our
consolidated trust debt securities, based on UPB, was approximately 92% at both December 31, 2011 and 2010. The
majority of newly issued Freddie Mac single-family mortgage-related securities during 2011 were backed by refinance
mortgages. During 2011, the UPB of Freddie Mac mortgage-related securities issued by consolidated trusts declined
approximately 5.9%, as the volume of our new issuances has been less than the volume of liquidations of these securities.
The UPB of multifamily Other Guarantee Transactions, excluding HFA-related securities, increased to $19.7 billion as of
December 31, 2011 from $8.2 billion as of December 31, 2010, due to increased multifamily loan securitization activity.




                                                                                         125                                                             Freddie Mac
       The table below presents additional details regarding our issued and guaranteed mortgage-related securities.
Table 36 — Freddie Mac Mortgage-Related Securities by Class Type(1)
                                                                                                                                                                                                                                                     December 31,
                                                                                                                                                                                                                             2011                        2010            2009
                                                                                                                                                                                                                                                     (in millions)
Held by Freddie Mac:
  Single-class . . . . . . . . . . . . . . . . . . . . . . . . . .   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,271                                                                                                   $ 157,752       $ 255,171
  Multiclass . . . . . . . . . . . . . . . . . . . . . . . . . . .   ..................................                                     98,396                                                                                                     105,851         119,444
Total held by Freddie Mac(2) . . . . . . . . . . . . . . . .         ..................................                                    223,667                                                                                                     263,603         374,615
Held by third parties:
  Single-class . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    949,301                                 1,020,200       1,031,869
  Multiclass . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    451,716                                   429,115         448,329
Total held by third parties . . . . . . . . . . . . . . . . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 1,401,017                                  1,449,315       1,480,198
Total Freddie Mac mortgage-related securities(2)                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $1,624,684                                $1,712,918      $1,854,813

(1) Based on UPB of the securities and excludes mortgage-related securities traded, but not yet settled.
(2) Beginning January 1, 2010, includes single-family single-class and certain multiclass securities held by us, which are recorded as extinguishments of
    debt securities of consolidated trusts on our consolidated balance sheets. Prior to 2010, all Freddie Mac mortgage-related securities held by us were
    accounted for as investments in securities on our consolidated balance sheets. See “NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES” for a discussion of our significant accounting policies related to our investments in securities and debt securities of consolidated trusts.

    The table below presents issuances and extinguishments of the debt securities of our consolidated trusts during 2011
and 2010, as well as the UPB of consolidated trusts held by third parties.

Table 37 — Issuances and Extinguishments of Debt Securities of Consolidated Trusts(1)
                                                                                                                                                                                                                                                       Year Ended December 31,
                                                                                                                                                                                                                                                         2011               2010
                                                                                                                                                                                                                                                              (in millions)
Beginning balance of debt securities of consolidated trusts held by third parties                                                                .........................                                                                           $1,517,001      $1,564,093
Issuances to third parties of debt securities of consolidated trusts:
   Issuances based on underlying mortgage product type:
      30-year or more amortizing fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . .                                                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      177,951         255,101
      20-year amortizing fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       19,250          24,293
      15-year amortizing fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       76,917          78,316
      Adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       25,675          15,869
      Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          152             845
      FHA/VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          160           1,429
      Debt securities of consolidated trusts retained by us at issuance . . . . . . . .                                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      (10,910)        (15,725)
         Net issuances of debt securities of consolidated trusts . . . . . . . . . . . . .                                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      289,195         360,128
   Reissuances of debt securities of consolidated trusts previously held by us(2) .                                                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       80,485          51,209
         Total issuances to third parties of debt securities of consolidated trusts .                                                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      369,680         411,337
Extinguishments, net(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (434,205)       (458,429)
Ending balance of debt securities of consolidated trusts held by third parties . .                                                               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $1,452,476      $1,517,001

(1) Based on UPB.
(2) Represents our sales of PCs and certain Other Guarantee Transactions previously held by us.
(3) Represents: (a) UPB of our purchases from third parties of PCs and Other Guarantee Transactions issued by our consolidated trusts; (b) principal
    repayments related to PCs and Other Guarantee Transactions issued by our consolidated trusts; and (c) certain remittance amounts associated with
    our trust security administration that are payable to third-party mortgage-related security holders as of December 31, 2011 and 2010.

Other Liabilities
     Other liabilities consist of the guarantee obligation, the reserve for guarantee losses on non-consolidated trusts and
other mortgage-related financial guarantees, servicer liabilities, accounts payable and accrued expenses, and other
miscellaneous liabilities. Other liabilities decreased to $6.0 billion as of December 31, 2011 from $8.1 billion as of
December 31, 2010 primarily because of a decrease in: (a) credit loss-related liabilities, largely due to short sale
adjustments related to accrued estimated losses on unsettled transactions; and (b) servicer advanced interest liabilities, due
to a decrease in seriously delinquent loans during the year ended December 31, 2011. See “NOTE 19: SELECTED
FINANCIAL STATEMENT LINE ITEMS” for additional information.




                                                                                                                     126                                                                                                                                         Freddie Mac
Total Equity (Deficit)
       The table below presents the changes in total equity (deficit) and certain capital-related disclosures.

Table 38 — Changes in Total Equity (Deficit)
                                                                                                                                                            Twelve Months
                                                                                                                Three Months Ended                              Ended
                                                                                            12/31/2011   9/30/2011   6/30/2011    3/31/2011   12/31/2010      12/31/2011
                                                                                                                             (in millions)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $ (5,991)    $ (1,478)   $ 1,237      $ (401)     $    (58)       $ (401)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            619       (4,422)    (2,139)        676          (113)        (5,266)
Other comprehensive income (loss), net of taxes:
  Changes in unrealized gains (losses) related to available-for-sale
     securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          701         (80)        903        1,941        1,097         3,465
  Changes in unrealized gains (losses) related to cash flow hedge
     relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          118           124         135         132         153             509
  Changes in defined benefit plans . . . . . . . . . . . . . . . . . . . . . .                   68             2           1          (9)         19              62
Total comprehensive income (loss). . . . . . . . . . . . . . . . . . . . . . .                1,506        (4,376)     (1,100)      2,740       1,156          (1,230)
Capital draw funded by Treasury . . . . . . . . . . . . . . . . . . . . . . . .               5,992         1,479          —          500         100           7,971
Senior preferred stock dividends declared . . . . . . . . . . . . . . . . . .                (1,655)       (1,618)     (1,617)     (1,605)     (1,603)         (6,495)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2             2           2           3           4               9
Total equity (deficit)/Net worth . . . . . . . . . . . . . . . . . . . . . . . . .          $ (146)      $ (5,991)   $ (1,478)    $ 1,237     $ (401)         $ (146)
Aggregate draws under the Purchase Agreement (as of period
  end)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $71,171      $65,179     $63,700      $63,700     $63,200         $71,171
Aggregate senior preferred stock dividends paid to Treasury in cash
  (as of period end) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $16,521      $14,866     $13,248      $11,631     $10,026         $16,521
Percentage of dividends paid to Treasury in cash to aggregate
  draws (as of period end) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 23%        23%          21%          18%         16%            23%
(1) Does not include the initial $1.0 billion liquidation preference of senior preferred stock that we issued to Treasury in September 2008 as an initial
    commitment fee and for which no cash was received.

     We requested a total of $7.6 billion and $13.0 billion in draws from Treasury under the Purchase Agreement to
eliminate quarterly equity deficits for 2011 and 2010, respectively. In addition, we paid cash dividends to Treasury of
$6.5 billion and $5.7 billion during 2011 and 2010, respectively.
     Net unrealized losses on our available-for-sale securities in AOCI decreased by $701 million and $3.5 billion during
the three months and year ended December 31, 2011, respectively. The decrease for the three months ended December 31,
2011 was primarily due to the impact of tightening OAS levels on our CMBS. The decrease for the year ended
December 31, 2011 was primarily due to gains on our agency securities and CMBS as a result of the impact of declining
rates and the recognition in earnings of other-than-temporary impairments on our non-agency mortgage-related securities,
partially offset by losses on our single-family non-agency mortgage-related securities due to widening OAS levels. Net
unrealized losses on our closed cash flow hedge relationships in AOCI decreased by $118 million and $509 million during
the three months and year ended December 31, 2011, respectively, primarily attributable to the reclassification of losses
into earnings related to our closed cash flow hedges as the originally forecasted transactions affected earnings.

                                                                           RISK MANAGEMENT
      Our investment and credit guarantee activities expose us to three broad categories of risk: (a) credit risk; (b) interest-
rate risk and other market risk; and (c) operational risk. See “RISK FACTORS” for additional information regarding these
and other risks.
     Risk management is a critical aspect of our business. We manage risk through a framework whereby our executive
management is responsible for independent risk evaluation. Within this framework, executive management monitors
performance against our risk management strategies and established risk limits and reporting thresholds, identifies and
assesses potential issues and provides oversight regarding changes in business processes and activities.
      Overall, the legal, political and regulatory influences on the financial services industry and the capital markets have
increased and created significant challenges and, as a result, we believe that our risk profile increased in 2011. Drivers of
this increase are: (a) mandated participation in government-sponsored assistance programs; (b) continued deterioration of
the mortgage insurer sector, resulting in further concentration issues; and (c) weakened global macro-economic conditions
and increased market volatility.
     Internally, our environment has also contributed to a higher risk profile. We have observed: (a) a significant increase
in people risk due to the uncertainty of the future of our company; (b) an increase in operational risk due to employee
turnover, key person dependencies, and the level and pace of organizational change within our company; and (c) an
                                                                                            127                                                            Freddie Mac
inadequacy of our business continuity and disaster recovery plans that may inhibit our ability to return to normal business
operations in the event of a disaster event.
     We expect legal, political and regulatory influences to continue to increase in 2012, which could increase uncertainty
in the mortgage industry, increase our operational and people risks, and increase the uncertainty associated with the use of
our models.

Credit Risk
     We are subject primarily to two types of credit risk: institutional credit risk and mortgage credit risk. Institutional
credit risk is the risk that a counterparty that has entered into a business contract or arrangement with us will fail to meet
its obligations. Mortgage credit risk is the risk that a borrower will fail to make timely payments on a mortgage we own
or guarantee. We are exposed to mortgage credit risk on our total mortgage portfolio because we either hold the mortgage
assets or have guaranteed mortgages in connection with the issuance of a Freddie Mac mortgage-related security, or other
guarantee commitment.

Institutional Credit Risk
    Since 2008, challenging market conditions have adversely affected the liquidity and financial condition of our
counterparties. The concentration of our exposure to our counterparties increased beginning in 2008 due to industry
consolidation and counterparty failures.
     Our exposure to single-family mortgage seller/servicers remained high during 2011 with respect to their repurchase
obligations arising from breaches of representations and warranties made to us for loans they underwrote and sold to us.
We rely on our single-family seller/servicers to perform loan workout activities as well as foreclosures on loans that they
service for us. Our credit losses could increase to the extent that our seller/servicers do not fully perform these obligations
in a timely manner. The financial condition of the mortgage insurance industry continued to deteriorate during 2011, and
the substantial majority of our mortgage insurance exposure is concentrated with four counterparties all of which are
under significant financial stress. In addition, our exposure to derivatives counterparties remains highly concentrated as
compared to historical levels.
      We continue to face challenges in reducing our risk concentrations with counterparties. Efforts we make to reduce
exposure to financially weakened counterparties could further increase our exposure to other individual counterparties or
increase concentration risk overall. The failure of any of our significant counterparties to meet their obligations to us
could have a material adverse effect on our results of operations, financial condition, and our ability to conduct future
business. For more information, see “RISK FACTORS — Competitive and Market Risks — We depend on our
institutional counterparties to provide services that are critical to our business, and our results of operations or financial
condition may be adversely affected if one or more of our institutional counterparties do not meet their obligations to us.”

Non-Agency Mortgage-Related Security Issuers
     Our investments in securities expose us to institutional credit risk to the extent that servicers, issuers, guarantors, or
third parties providing credit enhancements become insolvent or do not perform their obligations. Our investments in non-
Freddie Mac mortgage-related securities include both agency and non-agency securities. However, agency securities have
historically presented minimal institutional credit risk due to the guarantee provided by those institutions, and the
U.S. government’s support of those institutions.
     At the direction of our Conservator, we are working to enforce our rights as an investor with respect to the non-
agency mortgage-related securities we hold, and are engaged in efforts to mitigate losses on our investments in these
securities, in some cases in conjunction with other investors. The effectiveness of our efforts is highly uncertain and any
potential recoveries may take significant time to realize.
     In June 2011, Bank of America Corporation announced that it, BAC Home Loans Servicing, LP, Countrywide
Financial Corporation and Countrywide Home Loans, Inc. entered into a settlement agreement with The Bank of New
York Mellon, as trustee, to resolve certain claims with respect to a number of Countrywide first-lien and second-lien
residential mortgage-related securitization trusts. Bank of America indicated that the settlement is subject to final court
approval and certain other conditions. There can be no assurance that final court approval of the settlement will be
obtained or that all conditions will be satisfied. Bank of America noted that, given the number of investors and the
complexity of the settlement, it is not possible to predict the timing or ultimate outcome of the court approval process,
which could take a substantial period of time. We have investments in certain of these Countrywide securitization trusts
and would expect to benefit from this settlement, if final court approval is obtained. For more information, see
“NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS.”
                                                             128                                                  Freddie Mac
     On September 2, 2011, FHFA announced that, as Conservator for Freddie Mac and Fannie Mae, it had filed lawsuits
against 17 financial institutions and related defendants alleging: (a) violations of federal securities laws; and (b) in certain
lawsuits, common law fraud in the sale of residential non-agency mortgage-related securities to Freddie Mac and Fannie
Mae. FHFA, as Conservator, filed a similar lawsuit against UBS Americas, Inc. and related defendants on July 27, 2011.
FHFA seeks to recover losses and damages sustained by Freddie Mac and Fannie Mae as a result of their investments in
certain residential non-agency mortgage-related securities issued by these financial institutions.
     See “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities” for additional information on
credit risk associated with our investments in mortgage-related securities, including higher-risk components and
impairment charges we recognized in the years ended December 31, 2011, 2010, and 2009 related to these investments.
For information about institutional credit risk associated with our investments in non-mortgage-related securities, see
“NOTE 7: INVESTMENTS IN SECURITIES — Table 7.9 — Trading Securities” as well as “Cash and Other Investments
Counterparties” below.
Single-family Mortgage Seller/Servicers
     We acquire a significant portion of our single-family mortgage purchase volume from several large lenders, or seller/
servicers. Our top 10 single-family seller/servicers provided approximately 82% of our single-family purchase volume
during 2011. Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. accounted for 28% and 13%, respectively, of our
single-family mortgage purchase volume and were the only single-family seller/servicers that comprised 10% or more of
our purchase volume in 2011.
      We have contractual arrangements with our seller/servicers under which they agree to sell us mortgage loans, and
represent and warrant that those loans have been originated under specified underwriting standards. If we subsequently
discover that the representations and warranties were breached (i.e., that contractual standards were not followed), we can
exercise certain contractual remedies to mitigate our actual or potential credit losses. These contractual remedies include
the ability to require the seller/servicer to repurchase the loan at its current UPB or make us whole for any credit losses
realized with respect to the loan. As part of our expansion of HARP, we have agreed not to require lenders to provide us
with certain representations and warranties that they would ordinarily be required to commit to in selling loans to us. As a
result, we may face greater exposure to credit and other losses on these HARP loans. For more information, see
“Mortgage Credit Risk — Single-Family Mortgage Credit Risk — Single-Family Loan Workouts and the MHA Program —
Home Affordable Refinance Program.”
      We are exposed to institutional credit risk arising from the potential insolvency or non-performance by our mortgage
seller/servicers, including non-performance of their repurchase obligations arising from breaches of the representations and
warranties made to us for loans they underwrote and sold to us or failure to honor their recourse and indemnification
obligations to us. Pursuant to their repurchase obligations, our seller/servicers are obligated to repurchase mortgages sold
to us when there has been a breach of the representations and warranties made to us with respect to the mortgages. In lieu
of repurchase, we may choose to allow a seller/servicer to indemnify us against losses realized on such mortgages or
otherwise compensate us for the risk of continuing to hold the mortgages. In some cases, the ultimate amounts of
recovery payments we have received from seller/servicers may be significantly less than the amount of our estimates of
potential exposure to losses related to their obligations. If a seller/servicer does not satisfy its repurchase or
indemnification obligations with respect to a loan, we will be subject to the full range of credit risks posed by the loan if
the loan fails to perform, including the risk that a mortgage insurer may deny or rescind coverage on the loan (if the loan
is insured) and the risk that we will incur credit losses on the loan through the workout or foreclosure process.
      Our contracts require that a seller/servicer repurchase a mortgage after we issue a repurchase request, unless the
seller/servicer avails itself of an appeals process provided for in our contracts, in which case the deadline for repurchase is
extended until we decide the appeal. Some of our seller/servicers have failed to fully perform their repurchase obligations
due to lack of financial capacity, while others, including many of our larger seller/servicers, have not fully performed their
repurchase obligations in a timely manner. The table below provides a summary of our repurchase request activity for
2011, 2010, and 2009.




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Table 39 — Repurchase Request Activity(1)
                                                                                                                                                                                                                                                                               Year Ended December 31,
                                                                                                                                                                                                                                                                             2011        2010       2009
                                                                                                                                                                                                                                                                                     (in millions)
Beginning balance . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 3,807    $ 4,201     $ 3,608
  New requests issued .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   9,172     16,498      12,364
  Requests collected(2) .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . (4,490)     (7,467)     (5,326)
  Requests cancelled(3) .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . (5,707)     (9,298)     (4,776)
  Other(4) . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     (66)      (127)     (1,669)
Ending Balance . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . $ 2,716    $ 3,807     $ 4,201

(1) Beginning and ending balances represent the UPB of the loans associated with the repurchase requests. New requests issued and requests cancelled
    represent the amount of the request, while requests collected represent cash payment received.
(2) Requests collected include payments received upon fulfillment of the repurchase request, reimbursement of losses for requests associated with
    foreclosed mortgage loans, negotiated settlements, and other alternative remedies.
(3) Consists primarily of those requests that were resolved by the servicer providing missing documentation or a successful appeal of the request.
(4) Other includes items that affect the UPB of the loan while the repurchase request is outstanding, such as changes in UPB due to payments made on
    the loan. Also includes requests deemed uncollectible due to counterparty failures.

     As shown in the table above, the amount of new repurchase requests declined from $16.5 billion in 2010 to
$9.2 billion in 2011. This decline reflects: (a) a lower volume of loan reviews performed in 2011 relating to loans
originated in 2008 and prior years; (b) the reduction in the number of loans originated in 2005 to 2008, including those
with higher risk characteristics, within our single-family credit guarantee portfolio; and (c) the increase in the number of
loans covered by negotiated agreements (as discussed below) or originated by counterparties that defaulted in recent years.
      The UPB of loans subject to open repurchase requests declined to approximately $2.7 billion as of December 31,
2011 from $3.8 billion as of December 31, 2010 because the combined volume of requests collected and cancelled
exceeded the volume of new request issuances. As measured by UPB, approximately 39% and 34% of the repurchase
requests outstanding at December 31, 2011 and December 31, 2010, respectively, were outstanding for four months or
more since issuance of the initial request (these figures include repurchase requests for which appeals were pending). As
of December 31, 2011, two of our largest seller/servicers had aggregate repurchase requests outstanding, based on UPB,
of $1.4 billion, and approximately 48% of these requests were outstanding for four months or more since issuance of the
initial request. The amount we expect to collect on the outstanding requests is significantly less than the UPB of the loans
subject to repurchase requests primarily because many of these requests will likely be satisfied by reimbursement of our
realized credit losses by seller/servicers, instead of repurchase of loans at their UPB. Some of these requests also may be
rescinded in the course of the contractual appeal process. Based on our historical loss experience and the fact that many
of these loans are covered by credit enhancements, we expect the actual credit losses experienced by us should we fail to
collect on these repurchase requests will also be less than the UPB of the loans.
      Mortgage insurance rescission repurchase requests tend to be outstanding longer than other repurchase requests for a
number of reasons, including: (a) lenders do not agree with the basis used by the mortgage insurers to rescind coverage;
(b) the mortgage insurers’ appeals process for rescissions can be lengthy (as long as one year or more); (c) lenders expect
us to suspend repurchase enforcement until after the appeal decision by the mortgage insurer is made (although this is not
our practice); and (d) in certain cases, we have agreed to consider a repurchase alternative that would allow certain of our
seller/servicers to provide us a commitment for the amount of lost mortgage insurance coverage in lieu of a full
repurchase. Until a decision on such a repurchase alternative is made, we temporarily suspend the collection efforts for
outstanding repurchases associated with mortgage insurance rescission for these seller/servicers. Of the total amount of
repurchase requests outstanding at December 31, 2011, approximately $1.2 billion were issued due to mortgage insurance
rescission or mortgage insurance claim denial. Our actual credit losses could increase should the mortgage insurance
coverage not be reinstated and we fail to collect on these repurchase requests.
      During 2010 and 2009, we entered into agreements with certain of our seller/servicers to release specified loans from
certain repurchase obligations in exchange for one-time cash payments. In a memorandum to the FHFA Office of
Inspector General dated September 19, 2011, FHFA stated that in 2011 it had “suspended certain future repurchase
agreements with seller/servicers concerning their repurchase obligations pending the outcome” of a review by Freddie
Mac of its loan sampling methodology. We are in discussions with FHFA concerning our review of our sampling
methodology. We cannot predict when this process will be completed or whether or when FHFA will terminate or revise
its suspension. It is possible that our loan sampling methodology could change in ways that increase our repurchase
request volumes with our seller/servicers. During 2011, we expanded our reviews of defaulted loans to include certain
loans that were previously excluded from our review process.
     In order to resolve outstanding repurchase requests on a more timely basis with our single-family seller/servicers in
the future, we have begun to require certain of our larger seller/servicers to commit to plans for completing repurchases,
                                                                                                                                                         130                                                                                                                               Freddie Mac
with financial consequences or with stated remedies for non-compliance, as part of the annual renewals of our contracts
with them. As of December 31, 2011, our 13 largest seller/servicers, which hold more than 81% of all outstanding
repurchase requests, are subject to the revised contract terms. We continue to review loans and pursue our rights to issue
repurchase requests to our counterparties, as appropriate.
     Our estimate of recoveries from seller/servicer repurchase obligations is considered in our allowance for loan losses
as of December 31, 2011 and December 31, 2010; however, our actual recoveries may be different than our estimates. See
“NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Allowance for Loan Losses and Reserve for
Guarantee Losses” for further information. We believe we have appropriately provided for these exposures, based upon
our estimates of incurred losses, in our loan loss reserves at December 31, 2011 and December 31, 2010; however, our
actual losses may exceed our estimates.
      The table below summarizes the percentage of our single-family credit guarantee portfolio by year of loan origination
that is subject to agreements releasing loans from certain repurchase obligations, including TBW and other defaulted
counterparties. Since January 1, 2009, we have entered into three negotiated agreements (including the agreements with
GMAC and Bank of America discussed below) and have released repurchase obligations with 27 other seller/servicers
who were either no longer in operation or no longer approved as our seller/servicers, at December 31, 2011.

Table 40 — Loans Released from Repurchase Obligations(1)
                                                                                                                                                                                                                                                                      As of December 31, 2011
                                                                                                                                                                                                                                                                            Percentage of Single-family
Year of origination:                                                                                                                                                                                                                                            UPB         Credit Guarantee Portfolio
                                                                                                                                                                                                                                                            (in billions)
Negotiated agreements:
  2008 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    $ 21.8                     1.2%
  2007 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      48.2                     2.8
  2006 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      38.0                     2.2
  2005 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      34.5                     2.0
  2004 and prior. . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      23.4                     1.3
  Subtotal . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     165.9                     9.5
Other released loans:(2)
  2011 and 2010 . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       0.3                     0.1
  2009 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      11.5                     0.7
  2008 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      10.4                     0.6
  2007 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .      16.3                     0.9
  2006 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       8.8                     0.5
  2005 . . . . . . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       6.3                     0.4
  2004 and prior. . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       3.3                     0.2
  Total . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    $222.8                    12.8%

(1) Consists of all loans released from certain repurchase obligations since January 1, 2009.
(2) Consists of loans associated with seller/servicers who were either no longer in business or no longer approved as our seller/servicers at,
    December 31, 2011. We received or, in some cases, expect to receive cash totaling approximately $0.1 billion from the FDIC or other third parties
    for the release of related loans from servicing obligations for defaulted seller/servicers.

     GMAC Mortgage, LLC and Residential Funding Company, LLC (collectively GMAC), indirect subsidiaries of Ally
Financial Inc. (formerly, GMAC Inc.), are seller/servicers that together serviced and subserviced for an affiliated entity
approximately 4% of the single-family loans in our single-family credit guarantee portfolio as of December 31, 2011. In
March 2010, we entered into an agreement with GMAC, under which they made a one-time payment to us for the partial
release of repurchase obligations relating to loans sold to us prior to January 1, 2009. The partial release does not affect
any of GMAC’s potential repurchase obligations for loans sold to us by GMAC after January 1, 2009, nor does it affect
the ability to recover amounts associated with failure to comply with our servicing requirements. This agreement did not
have a material impact on our 2011 or 2010 consolidated statements of income and comprehensive income. Ally
Financial Inc. recently stated that the protracted period of adverse developments in the mortgage finance and credit
markets has adversely affected Residential Capital LLC’s business, liquidity, and its capital position and has raised
substantial doubt about Residential Capital LLC’s ability to continue as a going concern. Residential Capital LLC is the
parent company of Residential Funding Company, LLC, one of our mortgage servicers. For information on our exposure
to institutional counterparties, see “RISK FACTORS — Competitive and Market Risks — We depend on our institutional
counterparties to provide services that are critical to our business, and our results of operations or financial condition
may be adversely affected if one or more of our institutional counterparties do not meet their obligations to us.”
     On December 31, 2010, we entered into an agreement with Bank of America, N.A., and two of its affiliates, BAC
Home Loans Servicing, LP and Countrywide Home Loans, Inc., to resolve our currently outstanding and future claims for
repurchases arising from the breach of representations and warranties on certain loans purchased by us from Countrywide
                                                                                                                                                            131                                                                                                                      Freddie Mac
Home Loans, Inc. and Countrywide Bank FSB. Under the terms of the agreement, we received a $1.28 billion cash
payment in consideration for releasing Bank of America and its two affiliates from current and future repurchase requests
arising from loans sold to us by the Countrywide entities for which the first regularly scheduled monthly payments were
due on or before December 31, 2008. The UPB of the loans in this portfolio as of December 31, 2010, was approximately
$114 billion. The agreement applies only to certain claims for repurchase based on breaches of representations and
warranties and the agreement contains specified limitations and does not cover loans sold to us or serviced for us by other
Bank of America entities. This agreement did not have a material impact on our 2011 or 2010 consolidated statements of
income and comprehensive income.
      On August 24, 2009, TBW filed for bankruptcy. Prior to that date, we had terminated TBW’s status as a seller/
servicer of our loans. We had exposure to TBW with respect to its loan repurchase obligations. We also had exposure with
respect to certain borrower funds that TBW held for the benefit of Freddie Mac. TBW received and processed such funds
in its capacity as a servicer of loans owned or guaranteed by Freddie Mac. TBW maintained certain bank accounts,
primarily at Colonial Bank, to deposit such borrower funds and to provide remittance to Freddie Mac. Colonial Bank was
placed into receivership by the FDIC in August 2009.
     On or about June 14, 2010, we filed a proof of claim in the TBW bankruptcy aggregating $1.78 billion. Of this
amount, approximately $1.15 billion related to current and projected repurchase obligations and approximately
$440 million related to funds deposited with Colonial Bank, or with the FDIC as its receiver, which were attributable to
mortgage loans owned or guaranteed by us and previously serviced by TBW. The remaining $190 million represented
miscellaneous costs and expenses incurred in connection with the termination of TBW’s status as a seller/servicer of our
loans.
     In June 2011, with the approval of FHFA, as Conservator, we entered into a settlement with TBW and the creditors’
committee appointed in the TBW bankruptcy proceeding to represent the interests of the unsecured trade creditors of
TBW. At the time of settlement, we estimated our uncompensated loss exposure to TBW to be approximately $0.7 billion.
This estimated exposure largely relates to outstanding repurchase claims that have already been substantially provided for
in our financial statements through our provision for loan losses. Our ultimate losses could exceed our recorded estimate.
Potential changes in our estimate of uncompensated loss exposure or the potential for additional claims as discussed
below could cause us to record additional losses in the future.
     We understand that Ocala Funding, LLC, which is a wholly owned subsidiary of TBW, or its creditors, may file an
action to recover certain funds paid to us prior to the TBW bankruptcy. However, no actions against Freddie Mac related
to Ocala have been initiated in bankruptcy court or elsewhere to recover assets. We are also involved in an adversary
proceeding in bankruptcy court brought by certain underwriters at Lloyds, London and London Market Insurance
Companies against TBW, Freddie Mac, and other parties. For more information on these matters, including terms of the
TBW settlement, see “NOTE 18: LEGAL CONTINGENCIES — Taylor, Bean & Whitaker Bankruptcy.”
      A significant portion of our single-family mortgage loans are serviced by several large seller/servicers. Our top three
single-family loan servicers, Wells Fargo Bank N.A., JPMorgan Chase Bank, N.A., and Bank of America N.A., together
serviced approximately 49% of our single-family mortgage loans as of December 31, 2011. Wells Fargo Bank N.A.,
JPMorgan Chase Bank, N.A., and Bank of America N.A. serviced approximately 26%, 12%, and 11%, respectively, of our
single-family mortgage loans, as of December 31, 2011. Because we do not have our own servicing operation, if our
servicers lack appropriate process controls, experience a failure in their controls, or experience an operating disruption in
their ability to service mortgage loans, our business and financial results could be adversely affected.
      During the second half of 2010, a number of our single-family servicers, including several of our largest, announced
that they were evaluating the potential extent of issues relating to the possible improper execution of documents
associated with foreclosures of loans they service, including those they service for us. Some of these companies
temporarily suspended foreclosure proceedings in certain states in which they do business. While these servicers generally
resumed foreclosure proceedings in the first quarter of 2011, the rate at which they are effecting foreclosures has been
slower than prior to the suspensions. See “RISK FACTORS — Operational Risks — We have incurred, and will continue
to incur, expenses and we may otherwise be adversely affected by delays and deficiencies in the foreclosure process” for
further information.
     We also are exposed to the risk that seller/servicers might fail to service mortgages in accordance with our
contractual requirements, resulting in increased credit losses. For example, our seller/servicers have an active role in our
loan workout efforts, including under the MHA Program and the recent servicing alignment initiative, and therefore, we
also have exposure to them to the extent a decline in their performance results in a failure to realize the anticipated
benefits of our loss mitigation plans. In addition, during 2011, there have been several regulatory developments that have
                                                             132                                                Freddie Mac
affected and will continue to significantly impact our single-family mortgage servicers. For more information on
regulatory and other developments in mortgage servicing, and how these developments may impact our business, see
“BUSINESS — Regulation and Supervision — Legislative and Regulatory Developments — Developments Concerning
Single-Family Servicing Practices.”
     While we have legal remedies against seller/servicers who fail to comply with our contractual servicing requirements,
we are exposed to institutional credit risk in the event of their insolvency or if, for other causes, seller/servicers fail to
perform their obligations to repurchase affected mortgages, or (at our option) indemnify us for losses resulting from any
breach, or pay damages for any breach. In the event a seller/servicer does not fulfill its repurchase or other
responsibilities, we may seek partial recovery of amounts owed by the seller/servicer by transferring the applicable
mortgage servicing rights of the seller/servicer to a different servicer. However, this option may be difficult to accomplish
with respect to our largest seller/servicers due to the operational and capacity challenges of transferring a large servicing
portfolio. In 2011, we changed most of our servicing standards to permit full or partial termination of loan servicing in
order to transfer portions of the servicing portfolios to new servicers.

Multifamily Mortgage Seller/Servicers
     As of December 31, 2011, our top three multifamily servicers, Berkadia Commercial Mortgage LLC, CBRE Capital
Markets, Inc., and Wells Fargo Bank, N.A., each serviced more than 10% of our multifamily mortgage portfolio, and
together serviced approximately 40% of our multifamily mortgage portfolio. For 2011, our top two multifamily sellers,
CBRE Capital Markets, Inc. and NorthMarq Capital, LLC, accounted for 20% and 12%, respectively, of our multifamily
purchase volume. Our top 10 multifamily lenders represented an aggregate of approximately 81% of our multifamily
purchase volume for 2011.
      In our multifamily business, we are exposed to the risk that multifamily seller/servicers could come under financial
pressure, which could potentially cause degradation in the quality of the servicing they provide us, including their
monitoring of each property’s financial performance and physical condition. This could also, in certain cases, reduce the
likelihood that we could recover losses through lender repurchases, recourse agreements or other credit enhancements,
where applicable. This risk primarily relates to multifamily loans that we hold on our consolidated balance sheets where
we retain all of the related credit risk. We monitor the status of all our multifamily seller/servicers in accordance with our
counterparty credit risk management framework.

Mortgage Insurers
     We have institutional credit risk relating to the potential insolvency of, or non-performance by, mortgage insurers that
insure single-family mortgages we purchase or guarantee. As a guarantor, we remain responsible for the payment of
principal and interest if a mortgage insurer fails to meet its obligations to reimburse us for claims. If any of our mortgage
insurers that provide credit enhancement fail to fulfill their obligation, we could experience increased credit losses.
     We attempt to manage this risk by establishing eligibility standards for mortgage insurers and by monitoring our
exposure to individual mortgage insurers. Our monitoring includes performing regular analysis of the estimated financial
capacity of mortgage insurers under different adverse economic conditions. In addition, state insurance authorities regulate
mortgage insurers and we periodically meet with certain state authorities to discuss their views. We also monitor the
mortgage insurers’ credit ratings, as provided by nationally recognized statistical rating organizations, and we periodically
review the methods used by such organizations. None of our mortgage insurers had a rating higher than BBB as of
February 27, 2012. In evaluating the likelihood that an insurer will have the ability to pay our expected claims, we
consider our own analysis of the insurer’s financial capacity, any downgrades in the insurer’s credit rating, and various
other factors.
     As part of the estimate of our loan loss reserves, we evaluate the recovery and collectability related to mortgage
insurance policies for mortgage loans that we hold on our consolidated balance sheets as well as loans underlying our
non-consolidated Freddie Mac mortgage-related securities or covered by other guarantee commitments. We believe that
many of our mortgage insurers are not sufficiently capitalized to withstand the stress of the current weak economic
environment. Additionally, a number of our mortgage insurers have exceeded risk to capital ratios required by their state
insurance regulators. In many cases, such states have issued waivers to allow the companies to continue writing new
business in their states. Most waivers are temporary in duration or contain other conditions that the companies may be
unable to continue to meet due to their weakened condition or other factors. As a result of these and other factors, we
reduced our expectations of recovery from several of these insurers in determining our allowance for loan losses
associated with our single-family loans on our consolidated balance sheet as of December 31, 2011.
                                                             133                                                 Freddie Mac
     The table below summarizes our exposure to mortgage insurers as of December 31, 2011. In the event that a
mortgage insurer fails to perform, the coverage outstanding represents our maximum exposure to credit losses resulting
from such failure. As of December 31, 2011, most of the coverage outstanding from mortgage insurance shown in the
table below is attributed to primary policies rather than pool insurance policies.

Table 41 — Mortgage Insurance by Counterparty
                                                                                                                                                                   As of December 31, 2011
                                                                                                                                         Credit Rating     Primary          Pool         Coverage
                                                                                                                                   (1)
Counterparty Name                                                                                                     Credit Rating       Outlook(1)     Insurance(2)
                                                                                                                                                                        Insurance(2)   Outstanding(3)
                                                                                                                                                                         (in billions)
Mortgage Guaranty Insurance Corporation (MGIC)                        .   .   .   .   .   .   .   .   .   .   .   .    B                  Negative        $ 48.0          $28.3            $12.2
Radian Guaranty Inc . . . . . . . . . . . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .    B                  Negative          36.2            7.0             10.0
Genworth Mortgage Insurance Corporation . . . . .                     .   .   .   .   .   .   .   .   .   .   .   .    B                  Negative          29.9            0.8              7.5
United Guaranty Residential Insurance Co. . . . . .                   .   .   .   .   .   .   .   .   .   .   .   .    BBB                Stable            28.4            0.2              7.0
PMI Mortgage Insurance Co. (PMI)(4) . . . . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .    CCC–               Negative          24.0            1.3              6.1
Republic Mortgage Insurance Company (RMIC)(5)                         .   .   .   .   .   .   .   .   .   .   .   .    Not Rated          N/A               19.5            1.9              4.9
Triad Guaranty Insurance Corp(6) . . . . . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .    Not Rated          N/A                8.2            0.7              2.1
CMG Mortgage Insurance Co. . . . . . . . . . . . . . .                .   .   .   .   .   .   .   .   .   .   .   .    BBB                Negative           3.0            0.1              0.7
Essent Guaranty, Inc. . . . . . . . . . . . . . . . . . . . .         .   .   .   .   .   .   .   .   .   .   .   .    Not Rated          N/A                0.8             —               0.1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .                                       $198.0          $40.3            $50.6

(1) Latest rating available as of February 27, 2012. Represents the lower of S&P and Moody’s credit ratings and outlooks. In this table, the rating and
    outlook of the legal entity is stated in terms of the S&P equivalent.
(2) Represents the amount of UPB at the end of the period for our single-family credit guarantee portfolio covered by the respective insurance type.
    These amounts are based on our gross coverage without regard to netting of coverage that may exist to the extent an affected mortgage is covered
    under both types of insurance. See “Table 4.5 — Recourse and Other Forms of Credit Protection” in “NOTE 4: MORTGAGE LOANS AND LOAN
    LOSS RESERVES” for further information.
(3) Represents the remaining aggregate contractual limit for reimbursement of losses under policies of both primary and pool insurance. These amounts
    are based on our gross coverage without regard to netting of coverage that may exist to the extent an affected mortgage is covered under both types
    of insurance.
(4) Beginning in October 2011, PMI began paying valid claims 50% in cash and 50% in deferred payment obligations under order of its state regulator.
(5) In January 2012, RMIC began paying valid claims 50% in cash and 50% in deferred payment obligations under order of its state regulator.
(6) Beginning in June 2009, Triad began paying valid claims 60% in cash and 40% in deferred payment obligations under order of its state regulator.

     We received proceeds of $2.5 billion and $1.8 billion during the years ended December 31, 2011 and 2010,
respectively, from our primary and pool mortgage insurance policies for recovery of losses on our single-family loans. We
had outstanding receivables from mortgage insurers, net of associated reserves, of $1.0 billion and $1.5 billion as of
December 31, 2011 and December 31, 2010, respectively.
     The UPB of single-family loans covered by pool insurance declined approximately 29% during 2011, primarily due
to prepayments and other liquidation events. We did not purchase pool insurance on single-family loans in 2011. Our pool
insurance policies generally have coverage periods that range from 10 to 12 years. In many cases, we entered into these
agreements to cover higher-risk mortgage product types delivered to us through bulk transactions. As of December 31,
2011, pool insurance policies that will expire: (a) during 2012 covered approximately $2.4 billion in UPB of loans, and
the remaining contractual limit for reimbursement of losses on such loans was approximately $0.2 billion; and
(b) between 2013 and 2018 covered approximately $35.0 billion in UPB of loans, and the remaining contractual limit for
reimbursement of losses on such loans was approximately $0.8 billion. The remaining pool insurance policies, for which
the remaining contractual limit for reimbursement of losses was approximately $0.9 billion, expire after 2018. Any losses
in excess of the contractual limit will be borne by us. These figures include coverage under our pool insurance policies
based on the stated coverage amounts under such policies. As noted below, we do not expect to receive full payment of
our claims from several of these counterparties.
     Based on information we received from MGIC, we understand that MGIC may challenge our future claims under
certain of their pool insurance policies. We believe that our pool insurance policies with MGIC provide us with the right
to obtain recoveries for losses up to the aggregate limit indicated in the table above. However, MGIC’s interpretation of
these policies would result in claims coverage approximately $0.6 billion lower than the amount of coverage outstanding
set forth in the table above. We expect this difference to increase but not to exceed approximately $0.7 billion.
     In August 2011, we suspended PMI and its affiliates and RMIC and its affiliates as approved mortgage insurers,
making loans insured by either company (except relief refinance loans with pre-existing insurance) ineligible for sale to
Freddie Mac. Both of these companies ceased writing new business during the third quarter of 2011, and have been put
under state supervision. PMI instituted a partial claim payment plan in October 2011, under which claim payments will be
made 50% in cash, with the remaining amount deferred as a policyholder claim. RMIC instituted a partial claim payment
plan in January 2012, under which claim payments will be made 50% in cash and 50% in deferred payment obligations
for an initial period not to exceed one year. We and FHFA are in discussions with the state regulators of PMI and RMIC
                                                                                                                      134                                                           Freddie Mac
concerning future payments of our claims. It is not yet clear how the state regulators of PMI and RMIC will administer
their respective deferred payment plans.
     Triad is continuing to pay claims 60% in cash and 40% in deferred payment obligations under orders of its state
regulator. To date, the state regulator has not allowed Triad to begin paying its deferred payment obligations, and it is
uncertain when or if Triad will be permitted to do so. If Triad, PMI, and RMIC do not pay their deferred payment
obligations, we would lose a significant portion of the coverage from these counterparties shown in the table above.
      Given the difficulties in the mortgage insurance industry, we believe it is likely that other companies may also exceed
their regulatory capital limit in the future. In addition to Triad, RMIC, and PMI, we believe that certain other of our
mortgage insurance counterparties may lack sufficient ability to meet all their expected lifetime claims paying obligations
to us as those claims emerge. In the future, we believe our mortgage insurance exposure will likely be concentrated
among a smaller number of counterparties.
      At least one of our largest servicers entered into arrangements with two of our mortgage insurance counterparties for
settlement of future rescission activity for certain mortgage loans. Under such agreements, servicers pay and/or indemnify
mortgage insurers in exchange for the mortgage insurers agreeing not to issue mortgage insurance rescissions and /or
denials of coverage related to origination defects on Freddie Mac-owned mortgages. For loans covered by these
agreements, we may be at risk of additional loss to the extent we do not independently uncover loan defects and require
lender repurchase for loans that otherwise would have resulted in mortgage insurance rescission. Additionally, this type of
activity could adversely affect our mortgage insurers’ ability to pay in some economic scenarios. In April 2011, we issued
an industry letter to our servicers reminding them that they may not enter into these types of agreements without our
consent. Several of our servicers have asked us to consent to these types of agreements. We are evaluating these requests
on a case-by-case basis. For more information, see “RISK FACTORS — Competitive and Market Risks — We could incur
increased credit losses if our seller/servicers enter into arrangements with mortgage insurers for settlement of future
rescission activity and such agreements could potentially reduce the ability of mortgage insurers to pay claims to us.”

Bond Insurers
     Bond insurance, which may be either primary or secondary policies, is a credit enhancement covering certain of the
non-agency mortgage-related securities we hold. Primary policies are acquired by the securitization trust issuing the
securities we purchase, while secondary policies are acquired by us. Bond insurance exposes us to the risk that the bond
insurer will be unable to satisfy claims.
    The table below presents our coverage amounts of bond insurance, including secondary coverage, for the non-agency
mortgage-related securities we hold. In the event a bond insurer fails to perform, the coverage outstanding represents our
maximum exposure to credit losses related to such a failure.

Table 42 — Bond Insurance by Counterparty
                                                                                                                                                                                          As of December 31, 2011
                                                                                                                                                                     Credit Rating        Coverage         Percent of
                                                                                                                                                               (1)
Counterparty Name                                                                                                                                Credit Rating        Outlook(1)       Outstanding(2)        Total(2)
                                                                                                                                                                                     (dollars in billions)
Ambac Assurance Corporation (Ambac)(3) . . . . .                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     Not rated         N/A                  $ 4.3                44%
Financial Guaranty Insurance Company (FGIC)(3)                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     Not rated         N/A                    1.8                19
MBIA Insurance Corp. . . . . . . . . . . . . . . . . . .             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     B–                Under Review           1.3                14
Assured Guaranty Municipal Corp. . . . . . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     AA–               Stable                 1.1                11
National Public Finance Guarantee Corp. . . . . . .                  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     BBB               Developing             1.1                11
Syncora Guarantee Inc.(3) . . . . . . . . . . . . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     CC                Developing             0.1                 1
Radian Guaranty Inc. (Radian) . . . . . . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     B                 Negative               0.1                —
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                                            $ 9.7               100%

(1) Latest ratings available as of February 27, 2012. Represents the lower of S&P and Moody’s credit ratings. In this table, the rating and outlook of the
    legal entity is stated in terms of the S&P equivalent.
(2) Represents the remaining contractual limit for reimbursement of losses, including lost interest and other expenses, on non-agency mortgage-related
    securities.
(3) Ambac, FGIC, and Syncora Guarantee Inc. are currently operating under regulatory supervision.

     We monitor the financial strength of our bond insurers in accordance with our risk management policies. Some of
our larger bond insurers are in runoff mode where no new business is being issued. We expect to receive substantially less
than full payment of our claims from several of our bond insurers, including Ambac and FGIC, due to adverse
developments concerning these companies. Ambac and FGIC are currently not paying any of their claims. We believe that
we will likely receive substantially less than full payment of our claims from some of our other bond insurers, because we
believe they also lack sufficient ability to fully meet all of their expected lifetime claims-paying obligations to us as such
                                                                                                                         135                                                                        Freddie Mac
claims emerge. In the event one or more of our other bond insurers were to become subject to a regulatory order or
insolvency proceeding, our ability to recover certain unrealized losses on our mortgage-related securities would be
negatively impacted. We considered our expectations regarding our bond insurers’ ability to meet their obligations in
making our impairment determinations at December 31, 2011 and December 31, 2010. See “NOTE 7: INVESTMENTS
IN SECURITIES — Other-Than-Temporary Impairments on Available-For-Sale Securities” for additional information
regarding impairment losses on securities covered by bond insurers.
     The table below shows the non-agency mortgage-related securities we hold that were covered by primary bond
insurance at December 31, 2011 and December 31, 2010.

Table 43 — Non-Agency Mortgage-Related Securities Covered by Primary Bond Insurance
                                                                                                MBIA Insurance
                                                     Ambac                   FGIC                   Corp                    AGMC(1)                  Other(2)                  Total
                                                         Gross                   Gross                  Gross                    Gross                     Gross                   Gross
                                                       Unrealized              Unrealized             Unrealized               Unrealized                Unrealized              Unrealized
                                            UPB(3)      Losses(4)   UPB(3)      Losses(4)   UPB(3)     Losses(4)    UPB(3)      Losses(4)   UPB(3)        Losses(4)   UPB(3)      Losses(4)
                                                                                                            (in millions)
At December 31, 2011
First lien subprime . . . . . . . . . .     $ 619        $(169)     $ 831        $(230)     $     8      $ (1)      $ 404        $ (91)     $   —          $ —        $1,862       $ (491)
Second lien subprime . . . . . . . .            —           —         185           —            —         —           —            —           —             —          185           —
Option ARM . . . . . . . . . . . . .            39          —          —            —            —         —           76           (8)         —             —          115           (8)
Alt-A and other(5) . . . . . . . . . .         993         (87)       743          (56)         366        (3)        289          (81)         64            (3)      2,455         (230)
Manufactured housing . . . . . . . .            87         (14)        —            —           139        (6)         —            —           —             —          226          (20)
CMBS . . . . . . . . . . . . . . . . .       2,195         (86)        —            —            —         —           —            —        1,129           (38)      3,324         (124)
Obligations of states and political
   subdivisions . . . . . . . . . . . .        363         (11)         38          (1)      197           (5)         319          (3)         17            (2)        934          (22)
Total . . . . . . . . . . . . . . . . . .   $4,296       $(367)     $1,797       $(287)     $710         $(15)      $1,088       $(183)     $1,210         $ (43)     $9,101       $ (895)
At December 31, 2010
First lien subprime . . . . . . . . . .     $ 676        $(207)     $ 924        $(322)     $ 12         $ (1)      $ 427        $ (99)     $       3      $ —        $2,042       $ (629)
Second lien subprime . . . . . . . .            —           —         227          (12)       —            —           —            —              —          —          227          (12)
Option ARM . . . . . . . . . . . . .            50          —          —            —         —            —          129          (16)            —          —          179          (16)
Alt-A and other(5) . . . . . . . . . .       1,150        (186)       832          (93)      425          (29)        340          (82)            71         (1)      2,818         (391)
Manufactured housing . . . . . . . .            97         (11)        —            —        154          (15)         —            —              —          —          251          (26)
CMBS . . . . . . . . . . . . . . . . .       2,206        (277)        —            —         —            —           —            —           1,195       (159)      3,401         (436)
Obligations of states and political
   subdivisions . . . . . . . . . . . .        419         (44)         38          (2)      234          (19)         366         (18)         17            (3)      1,074           (86)
Total . . . . . . . . . . . . . . . . . .   $4,598       $(725)     $2,021       $(429)     $825         $(64)      $1,262       $(215)     $1,286         $(163)     $9,992       $(1,596)


(1) Assured Guaranty Municipal Corp. was formerly known as Financial Security Assurance.
(2) Represents insurance provided by Syncora Guarantee Inc., Radian Group, Inc., and CIFG Holdings Ltd, and includes certain exposures to bonds
    insured by NPFGC, formerly known as MBIA Insurance Corp. of Illinois, which is a subsidiary of MBIA Inc., the parent company of MBIA
    Insurance Corp.
(3) Represents the amount of UPB covered by insurance coverage. This amount does not represent the maximum amount of losses we could recover, as
    the insurance also covers unpaid interest.
(4) Represents the amount of gross unrealized losses at the respective reporting date on the securities with insurance.
(5) The majority of the Alt-A and other loans covered by bond insurance are securities backed by home equity lines of credit.

Cash and Other Investments Counterparties
     We are exposed to institutional credit risk arising from the potential insolvency or non-performance of counterparties
of non-mortgage-related investment agreements and cash equivalent transactions, including those entered into on behalf of
our securitization trusts. These financial instruments are investment grade at the time of purchase and primarily short-term
in nature, which mitigates institutional credit risk for these instruments.
     Our cash and other investment counterparties are primarily financial institutions and the Federal Reserve Bank. As of
December 31, 2011 and December 31, 2010, there were $68.5 billion and $91.6 billion, respectively, of cash and other
non- mortgage assets invested in financial instruments with institutional counterparties or deposited with the Federal
Reserve Bank. See “NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS” for further information on
counterparty credit ratings and concentrations within our cash and other investments.

Document Custodians
     We use third-party document custodians to provide loan document certification and custody services for the loans
that we purchase and securitize. In many cases, our seller/servicer customers or their affiliates also serve as document
custodians for us. Our ownership rights to the mortgage loans that we own or that back our PCs and REMICs and Other
Structured Securities could be challenged if a seller/servicer intentionally or negligently pledges or sells the loans that we
purchased or fails to obtain a release of prior liens on the loans that we purchased, which could result in financial losses
to us. When a seller/servicer or one of its affiliates acts as a document custodian for us, the risk that our ownership
interest in the loans may be adversely affected is increased, particularly in the event the seller/servicer were to become
insolvent. We seek to mitigate these risks through legal and contractual arrangements with these custodians that identify
                                                                                            136                                                                        Freddie Mac
our ownership interest, as well as by establishing qualifying standards for document custodians and requiring transfer of
the documents to our possession or to an independent third-party document custodian if we have concerns about the
solvency or competency of the document custodian.

Derivative Counterparties
      We execute OTC derivatives and exchange-traded derivatives and are exposed to institutional credit risk with respect
to both types of derivative transactions. We are an active user of exchange-traded derivatives, such as Treasury and
Eurodollar futures, and are required to post initial and maintenance margin with our clearing firm in connection with such
transactions. The posting of this margin exposes us to institutional credit risk in the event that our clearing firm or the
exchange’s clearinghouse fail to meet their obligations. However, the use of exchange-traded derivatives lessens our
institutional credit risk exposure to individual counterparties because a central counterparty is substituted for individual
counterparties, and changes in the value of open exchange-traded contracts are settled daily via payments made through
the financial clearinghouse established by each exchange. OTC derivatives, however, expose us to institutional credit risk
to individual counterparties because transactions are executed and settled directly between us and each counterparty,
exposing us to potential losses if a counterparty fails to meet its contractual obligations. When our net position with a
counterparty in OTC derivatives subject to a master netting agreement has a market value above zero (i.e., it is an asset
reported as derivative assets, net on our consolidated balance sheets), the counterparty is obligated to deliver collateral in
the form of cash, securities, or a combination of both, in an amount equal to that market value (less a small unsecured
“threshold” amount) as necessary to satisfy its net obligation to us under the master agreement.
     The Dodd-Frank Act will require central clearing and trading on exchanges or comparable trading facilities of many
types of derivatives. Pursuant to the Dodd-Frank Act, the U.S. Commodity Futures Trading Commission, or CFTC, is in
the process of determining the types of derivatives that must be subject to this requirement. See “BUSINESS —
Regulation and Supervision — Legislative and Regulatory Developments — Dodd-Frank Act” for more information. We
continue to work with the Chicago Mercantile Exchange and others to implement a central clearing platform for interest
rate derivatives. We will be exposed to institutional credit risk with respect to the Chicago Mercantile Exchange or other
comparable exchanges or trading facilities in the future, to the extent we use them to clear and trade derivatives, and to
the members of such clearing organizations that execute and submit our transactions for clearing.
     We seek to manage our exposure to institutional credit risk related to our OTC derivative counterparties using several
tools, including:
     • review of external rating analyses;
     • strict standards for approving new derivative counterparties;
     • ongoing monitoring and internal analysis of our positions with, and credit rating of, each counterparty;
     • managing diversification mix among counterparties;
     • master netting agreements and collateral agreements; and
     • stress-testing to evaluate potential exposure under possible adverse market scenarios.
     On an ongoing basis, we review the credit fundamentals of all of our OTC derivative counterparties to confirm that
they continue to meet our internal standards. We assign internal ratings, credit capital, and exposure limits to each
counterparty based on quantitative and qualitative analysis, which we update and monitor on a regular basis. We conduct
additional reviews when market conditions dictate or certain events affecting an individual counterparty occur.
     All of our OTC derivative counterparties are major financial institutions and are experienced participants in the OTC
derivatives market. However, a large number of OTC derivative counterparties had credit ratings of A+ or below as of
February 27, 2012. We require counterparties with credit ratings of A+ or below to post collateral if our net exposure to
them on derivative contracts exceeds $1 million. See “NOTE 16: CONCENTRATION OF CREDIT AND OTHER
RISKS” for additional information.
     The relative concentration of our derivative exposure among our primary derivative counterparties remains high. This
concentration has increased significantly since 2008 due to industry consolidation and the failure of certain counterparties,
and could further increase. The table below summarizes our exposure to our derivative counterparties, which represents
the net positive fair value of derivative contracts, related accrued interest and collateral held by us from our
counterparties, after netting by counterparty as applicable (i.e., net amounts due to us under derivative contracts which are
recorded as derivative assets). In addition, we have derivative liabilities where we post collateral to counterparties.
Pursuant to certain collateral agreements we have with derivative counterparties, the amount of collateral that we are
required to post is based on the credit rating of our long-term senior unsecured debt securities from S&P or Moody’s. The
                                                             137                                                  Freddie Mac
lowering or withdrawal of our credit rating by S&P or Moody’s may increase our obligation to post collateral, depending
on the amount of the counterparty’s exposure to Freddie Mac with respect to the derivative transactions. At December 31,
2011, our collateral posted exceeded our collateral held. See “CONSOLIDATED BALANCE SHEETS ANALYSIS —
Derivative Assets and Liabilities, Net” and “Table 31 — Derivative Fair Values and Maturities” for a reconciliation of fair
value to the amounts presented on our consolidated balance sheets as of December 31, 2011, which includes both cash
collateral held and posted by us, net.

Table 44 — Derivative Counterparty Credit Exposure
                                                                                                                  As of December 31, 2011
                                                                                                                                            Weighted Average
                                                                                           Notional or        Total         Exposure,         Contractual
                                                                         Number of         Contractual    Exposure at          Net of           Maturity        Collateral Posting
Rating(1)                                                              Counterparties(2)    Amount(3)     Fair Value (4)
                                                                                                                           Collateral(5)       (in years)         Threshold(6)
                                                                                                                    (dollars in millions)
AA– . . . . . . . . . . . . . . . . . . . .    .   .   .   .   .   .           5               $ 73,277     $ 536              $ 19               5.0          $10   million   or   less
A+ . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .           6                337,013      2,538                1               5.8           $1   million   or   less
A......................                        .   .   .   .   .   .           5                208,416         12               51               6.2           $1   million   or   less
A- . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .           2                 89,284         —                —                5.5           $1   million   or   less
Subtotal(7) . . . . . . . . . . . . . . . .    .   .   .   .   .   .          18                707,990      3,086               71               5.8
Futures and clearinghouse-settled
  derivatives . . . . . . . . . . . . . .      .   .   .   .   .   .                             43,831          8                8
Commitments(8) . . . . . . . . . . . .         .   .   .   .   .   .                             14,318         38               38
Swap guarantee derivatives . . . . .           .   .   .   .   .   .                              3,621         —                —
Other derivatives(9) . . . . . . . . . .       .   .   .   .   .   .                             18,489          1                1
Total derivatives . . . . . . . . . . . .      .   .   .   .   .   .                           $788,249     $3,133             $118

                                                                                                                  As of December 31, 2010
                                                                                                                                            Weighted Average
                                                                                           Notional or        Total          Exposure,        Contractual
                                                                         Number of         Contractual    Exposure at          Net of           Maturity        Collateral Posting
Rating(1)                                                              Counterparties(2)    Amount(3)     Fair Value (4)
                                                                                                                            Collateral(5)      (in years)         Threshold(6)
                                                                                                                    (dollars in millions)
AA . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .           3           $     53,975     $      —           $ —                6.8          $10   million   or   less
AA–. . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .           4                270,694         1,668            29               6.4          $10   million   or   less
A+ . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .           7                441,004           460             1               6.2           $1   million   or   less
A. . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .           3                177,277            16             2               5.2           $1   million   or   less
Subtotal(7) . . . . . . . . . . . . . . . .    .   .   .   .   .   .          17                942,950         2,144            32               6.1
Futures and clearinghouse-settled
  derivatives . . . . . . . . . . . . . .      .   .   .   .   .   .                          215,983            6                6
Commitments(8) . . . . . . . . . . . .         .   .   .   .   .   .                           14,292          103              103
Swap guarantee derivatives . . . .             .   .   .   .   .   .                            3,614           —                —
Other derivatives(9) . . . . . . . . . .       .   .   .   .   .   .                           28,657            2                2
Total derivatives . . . . . . . . . . . .      .   .   .   .   .   .                       $1,205,496       $2,255             $143

(1) We use the lower of S&P and Moody’s ratings to manage collateral requirements. In this table, the rating of the legal entity is stated in terms of the
    S&P equivalent.
(2) Based on legal entities. Affiliated legal entities are reported separately.
(3) Notional or contractual amounts are used to calculate the periodic settlement amounts to be received or paid and generally do not represent actual
    amounts to be exchanged.
(4) For each counterparty, this amount includes derivatives with a positive fair value (recorded as derivative assets, net), including the related accrued
    interest receivable/payable, when applicable. For counterparties included in the subtotal, positions are shown netted at the counterparty level
    including accrued interest receivable/payable and trade/settle fees.
(5) Calculated as Total Exposure at Fair Value less cash collateral held as determined at the counterparty level. Includes amounts related to our posting
    of cash collateral in excess of our derivative liability as determined at the counterparty level. For derivatives settled through an exchange or
    clearinghouse, excludes consideration of maintenance margin posted by our counterparty.
(6) Counterparties are required to post collateral when their exposure exceeds agreed-upon collateral posting thresholds. These thresholds are typically
    based on the counterparty’s credit rating and are individually negotiated.
(7) Consists of OTC derivative agreements for interest-rate swaps, option-based derivatives (excluding certain written options), foreign-currency swaps,
    and purchased interest-rate caps.
(8) Commitments include: (a) our commitments to purchase and sell investments in securities; (b) our commitments to purchase mortgage loans; and
    (c) our commitments to purchase and extinguish or issue debt securities of our consolidated trusts.
(9) Consists primarily of certain written options and certain credit derivatives. Written options do not present counterparty credit exposure, because we
    receive a one-time up-front premium in exchange for giving the holder the right to execute a contract under specified terms, which generally puts us
    in a liability position.

     Over time, our exposure to individual counterparties for OTC interest-rate swaps, option-based derivatives, foreign-
currency swaps, and purchased interest rate caps varies depending on changes in fair values, which are affected by
changes in period-end interest rates, the implied volatility of interest rates, foreign-currency exchange rates, and the
amount of derivatives held. If all of our counterparties for these derivatives defaulted simultaneously on December 31,
2011, the combined amount of our uncollateralized and overcollateralized exposure to these counterparties, or our
maximum loss for accounting purposes after applying netting agreements and collateral, would have been approximately
                                                                                                    138                                                              Freddie Mac
$71 million. Our similar exposure as of December 31, 2010 was $32 million. Three counterparties each accounted for
greater than 10% and collectively accounted for 97% of our net uncollateralized exposure to derivative counterparties,
excluding commitments, at December 31, 2011. These counterparties were HSBC Bank USA, Royal Bank of Scotland,
and UBS AG., all of which were rated “A” or above by S&P as of February 27, 2012.
      Approximately 99% of our counterparty credit exposure for OTC interest-rate swaps, option-based derivatives,
foreign-currency swaps, and purchased interest rate caps was collateralized at December 31, 2011 (excluding amounts
related to our posting of cash collateral in excess of our derivative liability as determined at the counterparty level). The
remaining exposure was primarily due to exposure amounts below the applicable counterparty collateral posting threshold,
as well as market movements during the time period between when a derivative was marked to fair value and the date we
received the related collateral. In some instances, these market movements result in us having provided collateral that has
fair value in excess of our obligation, which represents our overcollateralization exposure. Collateral is typically
transferred within one business day based on the values of the related derivatives.
     In the event a derivative counterparty defaults, our economic loss may be higher than the uncollateralized exposure
of our derivatives if we are not able to replace the defaulted derivatives in a timely and cost-effective fashion. We could
also incur economic loss if the collateral held by us cannot be liquidated at prices that are sufficient to recover the amount
of such exposure. We monitor the risk that our uncollateralized exposure to each of our OTC counterparties for interest-
rate swaps, option-based derivatives, foreign-currency swaps, and purchased interest rate caps will increase under certain
adverse market conditions by performing daily market stress tests. These tests, which involve significant management
judgment, evaluate the potential additional uncollateralized exposure we would have to each of these derivative
counterparties on OTC derivatives contracts assuming certain changes in the level and implied volatility of interest rates
and certain changes in foreign currency exchange rates over a brief time period. Our actual exposure could vary
significantly from amounts forecasted by these tests.
      The total exposure on our OTC forward purchase and sale commitments, which are treated as derivatives for
accounting purposes, was $38 million and $103 million at December 31, 2011 and December 31, 2010, respectively.
These commitments are uncollateralized. Because the typical maturity of our forward purchase and sale commitments is
less than 60 days and they are generally settled through a clearinghouse, we do not require master netting and collateral
agreements for the counterparties of these commitments. However, we monitor the credit fundamentals of the
counterparties to our forward purchase and sale commitments on an ongoing basis in an effort to ensure that they continue
to meet our internal risk-management standards.

Selected European Sovereign and Non-Sovereign Exposures
    The sovereign debt of Spain, Italy, Ireland, Portugal, and Greece (which we refer to herein as “troubled European
countries”) and the credit status of financial institutions with significant exposure to the troubled European countries has
been adversely impacted due to weaknesses in the economic and fiscal situations of those countries. Moody’s and
Standard & Poor’s recently downgraded a number of European countries, including Italy, Spain, and Portugal. We are
monitoring our exposures to these countries and institutions.
     As of December 31, 2011, we did not hold any debt issued by the governments of these troubled European countries
and did not hold any financial instruments entered into with sovereign governments in those countries. As of that date, we
also did not hold any debt issued by corporations or financial institutions domiciled in these troubled European countries
and did not hold any other financial instruments entered into with corporations or financial institutions domiciled in those
countries. For purposes of this discussion, we consider an entity to be domiciled in a country if its parent entity is
headquartered in that country.
      Our derivative portfolio and cash and other investments portfolio counterparties include a number of major European
and non-European financial institutions. Many of these institutions operate in Europe, and we believe that all of these
financial institutions have direct or indirect exposure to these troubled European countries. For many of these institutions,
their direct and indirect exposures to these troubled European countries change on a daily basis. We monitor our major
counterparties’ exposures to troubled European countries, and adjust our exposures and risk limits to individual
counterparties accordingly. Our exposures to derivative portfolio and cash and other investments portfolio counterparties
are described in “Derivative Counterparties,” “Cash and Other Investments Counterparties” and “NOTE 16:
CONCENTRATION OF CREDIT AND OTHER RISKS.”
     In recent months, we have taken a number of actions designed to reduce our exposures to certain derivative portfolio
and cash and other investments portfolio counterparties due to their exposure to troubled European countries, including
substantially reducing our derivative exposure limits, our limits on the amount of unsecured overnight deposits, and our
                                                             139                                                 Freddie Mac
limits for asset-backed commercial paper. For certain repurchase counterparties, we have reduced the credit limit and
restricted the term of such transactions to overnight. We have also ceased investing in prime money funds that could hold
substantial amounts of the non-U.S. sovereign debt.
      It is possible that continued adverse developments in Europe could significantly impact our counterparties that have
direct or indirect exposure to troubled European countries. In turn, this could adversely affect their ability to meet their
obligations to us. For more information, see “RISK FACTORS — Competitive and Market Risks — We depend on our
institutional counterparties to provide services that are critical to our business, and our results of operations or financial
condition may be adversely affected if one or more of our institutional counterparties do not meet their obligations to us.”

Mortgage Credit Risk
      We are exposed to mortgage credit risk principally in our single-family credit guarantee and multifamily mortgage
portfolios because we either hold the mortgage assets or have guaranteed mortgages in connection with the issuance of a
Freddie Mac mortgage-related security, or other guarantee commitment. We are also exposed to mortgage credit risk
related to our investments in non-Freddie Mac mortgage-related securities. For information about our holdings of these
securities, see “CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities — Mortgage-Related
Securities.”
     Single-family mortgage credit risk is primarily influenced by the credit profile of the borrower of the mortgage (e.g.,
credit score, credit history, and monthly income relative to debt payments), documentation level, the number of borrowers,
the features of the mortgage itself, the purpose of the mortgage, occupancy type, property type, the LTV ratio, and local
and regional economic conditions, including home prices and unemployment rates. Multifamily mortgage credit risk is
primarily influenced by multifamily market conditions (e.g., rental and vacancy rates), the quality of the property’s
management, the features of the mortgage itself, the LTV ratio, the property’s operating cash flow, and the local and
regional economic conditions.
     All mortgages that we purchase or guarantee have an inherent risk of default. To manage our mortgage credit risk in
our single-family credit guarantee and multifamily mortgage portfolios, we focus on three key areas: underwriting
standards and quality control process; portfolio diversification; and portfolio management activities, including loss
mitigation and use of credit enhancements.

Single-Family Mortgage Credit Risk
     Through our delegated underwriting process, single-family mortgage loans and the borrowers’ ability to repay the
loans are evaluated using several critical risk characteristics, including, but not limited to, the borrower’s credit score and
credit history, the borrower’s monthly income relative to debt payments, the original LTV ratio, the type of mortgage
product and the occupancy type of the loan. As part of our quality control process, after our purchase of the loans, we
review the underwriting documentation for a sample of loans for compliance with our contractual standards. The most
common underwriting deficiencies found in our reviews in 2011 are related to insufficient income and inadequate or
missing documentation to support borrower qualification. The next most common deficiency is inaccurate data entered
into Loan Prospector, our automated underwriting system. We are continuing to perform quality control sampling for
loans we purchased in 2011 and have not yet compiled our results.
      We meet with our larger seller/servicers with deficiencies from our performing loan sampling to help ensure they
make appropriate changes to their underwriting process. In addition, for all of our largest seller/servicers, we actively
manage the current quality of loan originations by providing monthly written and oral communications regarding loan
defect rates and the drivers of those defects as identified in our performing loan quality control sampling reviews. If
necessary, we work with seller/servicers to develop an appropriate plan of corrective action. For loans with identified
underwriting deficiencies, we may require immediate repurchase or allow performing loans to remain in our portfolio
subject to our continued right to issue a repurchase request to the seller/servicers, depending on the facts and
circumstances. Our right to request repurchase by seller/servicers is intended to protect us against deficiencies in
underwriting by our seller/servicers. While this protection is intended to reduce our mortgage credit risk, it increases our
institutional risk exposure to seller/servicers. See “Institutional Credit Risk — Single-Family Mortgage Seller/Servicers”
for further information on repurchase requests. Our contracts with some seller/servicers give us the right to levy financial
penalties when mortgage loans delivered to us fail to meet our aggregate loan quality metrics. See “BUSINESS — Our
Business” and “BUSINESS — Our Business Segments — Single-Family Guarantee Segment — Underwriting
Requirements and Quality Control Standards” for information about our charter requirements for single-family loan
purchases, delegated underwriting, and our quality control monitoring. See “BUSINESS— Regulation and Supervision —
                                                              140                                                  Freddie Mac
Federal Housing Finance Agency — Affordable Housing Goals” for a discussion of factors that may cause us to purchase
loans that do not meet our normal standards.
     We were significantly adversely affected by deteriorating conditions in the single-family housing and mortgage
markets during 2008 and 2009. During 2005 to 2007, financial institutions substantially increased origination and
securitization of certain higher risk mortgage loans, such as subprime, option ARM, interest-only and Alt-A, and these
loans comprised a much larger proportion of origination and securitization issuance volumes during 2006 and 2007, and to
a lesser extent in 2005, as compared to prior or subsequent years. During this time, we increased our participation in the
market for these products through our purchases of non-agency mortgage-related securities and through our loan
securitization and guarantee activities. Our expanded participation in these products was driven by a combination of
competing objectives and pressures, including meeting our affordable housing goals, competition, the desire to maintain or
increase market share, and generating returns for investors. The mortgage market has changed considerably since 2007.
Financial institutions have tightened their underwriting standards, which has significantly reduced the amount of subprime,
option ARM, interest-only, and Alt-A loans being originated.
     Conditions in the mortgage market continued to remain challenging during 2011. Most single-family mortgage loans,
especially those originated from 2005 through 2008, have been affected by the compounding pressures on household
wealth caused by significant declines in home values that began in 2006 and the ongoing weak employment environment.
Our serious delinquency rates remained high in 2011 compared to historical levels, as discussed in “Credit
Performance — Delinquencies.” The UPB of our single-family non-performing loans remained at high levels during 2011.

Characteristics of the Single-Family Credit Guarantee Portfolio
     The average UPB of loans in our single-family credit guarantee portfolio was approximately $151,000 and $150,000
at December 31, 2011 and December 31, 2010, respectively. Our single-family mortgage purchases and other guarantee
commitment activity in 2011 decreased by 17% to $320.8 billion, as compared to $386.4 billion in 2010. Approximately
92% of the single-family mortgages we purchased in 2011 were fixed-rate amortizing mortgages, based on UPB.
Approximately 78% of the single-family mortgages we purchased in 2011 were refinance mortgages, including
approximately 26% that were relief refinance mortgages, based on UPB.
    The table below provides additional characteristics of single-family mortgage loans purchased during 2011, 2010, and
2009, and of our credit guarantee portfolio at December 31, 2011, 2010, and 2009.




                                                           141                                                Freddie Mac
Table 45 — Characteristics of the Single-Family Credit Guarantee Portfolio(1)
                                                                                                                                                                                                                                                                                    Percent of Purchases
                                                                                                                                                                                                                                                                                      During The Year           Portfolio(2)
                                                                                                                                                                                                                                                                                    Ended December 31,       at December 31,
                                                                                                                                                                                                                                                                                    2011    2010    2009   2011   2010       2009

Original LTV Ratio Range(3)(4)
 60% and below . . . . . . . . . .                              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    30% 31% 34% 23% 23% 23%
 Above 60% to 70% . . . . . . .                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    17   17   18   16   16   16
 Above 70% to 80% . . . . . . .                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    44   45   41   42   43   45
 Above 80% to 90% . . . . . . .                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     5    4    5    9    9    8
 Above 90% to 100% . . . . . . .                                .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     4    3    2    8    8    8
 Above 100% . . . . . . . . . . . .                             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     1    1    1    2    1   —
 Total . . . . . . . . . . . . . . . . .                        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   100% 100% 100% 100% 100% 100%
   Weighted average original LTV ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                           67%     67%     66%    72%      71%     71%
Estimated Current LTV Ratio Range(5)
  60% and below . . . . . . . . . . . . . . .                                       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                           25% 27% 28%
  Above 60% to 70% . . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                           12   12   12
  Above 70% to 80% . . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                           18   17   16
  Above 80% to 90% . . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                           15   16   16
  Above 90% to 100% . . . . . . . . . . . .                                         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                           10   10   10
  Above 100% to 110% . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                            6    6    6
  Above 110% to 120% . . . . . . . . . . .                                          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                            4    4    4
  Above 120% . . . . . . . . . . . . . . . . .                                      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                           10    8    8
  Total . . . . . . . . . . . . . . . . . . . . . .                                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                          100% 100% 100%
   Weighted average estimated current LTV                                               ratio:
    Relief refinance mortgages(6) . . . . . .                                           . . . . . . . . . . . . . . . . ...............................                                                                                                                                                     79%      78%     85%
    All other mortgages . . . . . . . . . . . .                                         . . . . . . . . . . . . . . . ................................                                                                                                                                                      80%      78%     77%
    Total mortgages . . . . . . . . . . . . . .                                         . . . . . . . . . . . . . . . . ...............................                                                                                                                                                     80%      78%     77%
Credit Score(3)(7)
  740 and above .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    74% 73% 73% 55% 53% 50%
  700 to 739 . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    17   17   18   21   21   22
  660 to 699 . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     7    7    7   14   15   16
  620 to 659 . . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     2    2    2    7    7    8
  Less than 620 .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     1    1    1    3    3    3
  Not available .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     1    1    1    1    1    1
  Total . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   100% 100% 100% 100% 100% 100%
   Weighted average credit score:
    Relief refinance mortgages(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                                                744     745      738
    All other mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                                              734     732      729
    Total mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                                              735     733      730
Loan Purpose
  Purchase . . . . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    22% 20% 20% 30% 31% 35%
  Cash-out refinance            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    18   21   26   27   29   30
  Other refinance(8) .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    60   59   54   43   40   35
  Total . . . . . . . . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   100% 100% 100% 100% 100% 100%

Property Type
  Detached/townhome(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                         94% 94% 94% 92% 92% 92%
  Condo/Co-op . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                         6    6    6    8    8    8
  Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                                                                 100% 100% 100% 100% 100% 100%

Occupancy Type
 Primary residence . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .    92% 93% 93% 91% 91% 91%
 Second/vacation home .                     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     4    4    5    5    5    5
 Investment . . . . . . . .                 .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     4    3    2    4    4    4
 Total . . . . . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   100% 100% 100% 100% 100% 100%

(1) Purchases and ending balances are based on the UPB of the single-family credit guarantee portfolio. Other Guarantee Transactions with ending balances of
    $2 billion at December 31, 2011, 2010, and 2009, are excluded from portfolio balance data since these securities are backed by non-Freddie Mac issued
    securities for which the loan characteristics data was not available.
(2) Includes loans acquired under our relief refinance initiative, which began in 2009.
(3) Purchases columns exclude mortgage loans acquired under our relief refinance initiative. See “Table 52 — Single-Family Refinance Loan Volume” for further
    information on the LTV ratios of these loans.
(4) Original LTV ratios are calculated as the amount of the mortgage we guarantee including the credit-enhanced portion, divided by the lesser of the appraised
    value of the property at the time of mortgage origination or the mortgage borrower’s purchase price. Second liens not owned or guaranteed by us are excluded
    from the LTV ratio calculation because we generally do not receive data about them. The existence of a second lien mortgage reduces the borrower’s equity in
    the home and, therefore, can increase the risk of default.
(5) Current LTV ratios are management estimates, which are updated on a monthly basis. Current market values are estimated by adjusting the value of the
    property at origination based on changes in the market value of homes in the same geographical area since origination. Estimated current LTV ratio range is
    not applicable to purchase activity, and excludes any secondary financing by third parties.
(6) Relief refinance mortgages comprised approximately 11%,7%, and 2% of our single-family credit guarantee portfolio by UPB as of December 31, 2011, 2010,
    and 2009, respectively.
(7) Credit score data is based on FICO scores. Although we obtain updated credit information on certain borrowers after the origination of a mortgage, such as
    those borrowers seeking a modification, the scores presented in this table represent only the credit score of the borrower at the time of loan origination.
(8) Other refinance transactions include: (a) refinance mortgages with “no cash-out” to the borrower; and (b) refinance mortgages for which the delivery data
    provided was not sufficient for us to determine whether the mortgage was a cash-out or a no cash-out refinance transaction.
(9) Includes manufactured housing and homes within planned unit development communities. The UPB of manufactured housing mortgage loans purchased during
    2011, 2010, and 2009, was $376 million, $403 million, and $607 million, respectively.

                                                                                                                                                                                142                                                                                                                           Freddie Mac
Loan-to-Value Ratio
     An important safeguard against credit losses on mortgage loans in our single-family credit guarantee portfolio is
provided by the borrowers’ equity in the underlying properties. As estimated current LTV ratios increase, the borrower’s
equity in the home decreases, which negatively affects the borrower’s ability to refinance or sell the property for an
amount at or above the balance of the outstanding mortgage loan. There is an increase in borrower default risk as LTV
ratios increase, particularly for loans with LTV ratios above 80%. If a borrower has an estimated current LTV ratio greater
than 100%, the borrower is “underwater” and, based upon historical information, is more likely to default than other
borrowers due to limits in the ability to sell or refinance. The UPB of mortgages in our single-family credit guarantee
portfolio with estimated current LTV ratios greater than 100% was 20% and 18% as of December 31, 2011 and
December 31, 2010, respectively. The serious delinquency rate for single-family loans with estimated current LTV ratios
greater than 100% was 12.8% and 14.9% as of December 31, 2011 and December 31, 2010, respectively. Due to declines
in home prices since 2006, we estimate that as of December 31, 2011, approximately 49% of the loans originated in 2005
through 2008 that remained in our single-family credit guarantee portfolio as of that date had current LTV ratios greater
than 100%. In recent years, loans with current LTV ratios greater than 100% contributed disproportionately to our credit
losses. As of December 31, 2011 and December 31, 2010, for the loans in our single-family credit guarantee portfolio
with greater than 80% estimated current LTV ratios, the borrowers had a weighted average credit score at origination of
724 and 721, respectively.

Credit Score
     Credit scores are a useful measure for assessing the credit quality of a borrower. Credit scores are numbers reported
by credit repositories, based on statistical models, that summarize an individual’s credit record. FICO scores are the most
commonly used credit scores today. FICO scores are ranked on a scale of approximately 300 to 850 points. Statistically,
borrowers with higher credit scores are more likely to repay or have the ability to refinance than those with lower scores.
We only obtain credit scores of borrowers at the time of origination and do not typically receive updated data on borrower
credit scores after origination. Credit scores presented within this Annual Report on Form 10-K are at the time of
origination and may not be indicative of borrowers’ creditworthiness at December 31, 2011.

Loan Purpose
     Mortgage loan purpose indicates how the borrower intends to use the funds from a mortgage loan. In a purchase
transaction, the funds are used to acquire a property. In a cash-out refinance transaction, in addition to paying off existing
mortgage liens, the borrower obtains additional funds that may be used for other purposes, including paying off
subordinate mortgage liens and providing unrestricted cash proceeds to the borrower. In other refinance transactions, the
funds are used to pay off existing mortgage liens and may be used in limited amounts for certain specified purposes; such
refinances are generally referred to as “no cash-out” or “rate and term” refinances. The percentage of home purchase
loans in our loan acquisition volume remained at low levels during 2011. Historically low interest rates contributed to
high refinance activity in 2011, though it declined from 2010 levels. Cash-out refinancings generally have had a higher
risk of default than mortgages originated in no cash-out, or rate and term, refinance transactions.

Property Type
     Townhomes and detached single-family houses are the predominant type of single-family property. Condominiums
are a property type that historically experiences greater volatility in home prices than detached single-family residences.
Condominium loans in our single-family credit guarantee portfolio have a higher percentage of first-time homebuyers and
homebuyers whose purpose is for investment or for a second home. In practice, investors and second home borrowers
often seek to finance the condominium purchase with loans having a higher original LTV ratio than other borrowers.
Approximately 36% of the condominium loans within our single-family credit guarantee portfolio are in California,
Florida, and Illinois, which are among the states that have been most adversely affected by the economic recession and
housing downturn. Condominium loans comprised 15% of our credit losses during both years ended December 31, 2011
and 2010, while these loans comprised 8% of our single-family credit guarantee portfolio at both dates.

Occupancy Type
     Borrowers may purchase a home as a primary residence, second/vacation home or investment property that is
typically a rental property. Mortgage loans on properties occupied by the borrower as a primary residence tend to have a
lower credit risk than mortgages on investment properties or secondary residences.
                                                             143                                                 Freddie Mac
Geographic Concentration
      Local economic conditions can affect borrowers’ ability to repay loans and the value of the collateral underlying the
loans. Because our business involves purchasing mortgages from every geographic region in the U.S., we maintain a
geographically diverse single-family credit guarantee portfolio. While our single-family credit guarantee portfolio’s
geographic distribution was relatively stable in recent years and remains broadly diversified across these regions, we were
negatively impacted by overall home price declines in each region since 2006. Our credit losses continue to be greatest in
those states that experienced significant decreases in property values since 2006, such as California, Florida, Nevada and
Arizona. See “NOTE 16: CONCENTRATION OF CREDIT AND OTHER RISKS” for more information concerning the
distribution of our single-family credit guarantee portfolio by geographic region.

Attribute Combinations
     Certain combinations of loan characteristics often can indicate a higher degree of credit risk. For example, single-
family mortgages with both high LTV ratios and borrowers who have lower credit scores typically experience higher rates
of serious delinquency and default. We estimate that there were $11.1 billion and $11.8 billion at December 31, 2011 and
December 31, 2010, respectively, of loans in our single-family credit guarantee portfolio with both original LTV ratios
greater than 90% and FICO scores less than 620 at the time of loan origination. Certain mortgage product types, including
interest-only or option ARM loans, that have additional higher risk characteristics, such as lower credit scores or higher
LTV ratios, will also have a higher risk of default than those same products without these characteristics. The presence of
a second lien mortgage can also increase the risk that a borrower will default. A second lien mortgage reduces the
borrower’s equity in the home, and has a similar negative effect on the borrower’s ability to refinance or sell the property
for an amount at or above the combined balances of the first and second mortgages. As of December 31, 2011 and
December 31, 2010, approximately 15% and 14% of loans in our single-family credit guarantee portfolio had second lien
financing by third parties at the time of origination of the first mortgage, and we estimate that these loans comprised 17%
and 19%, respectively, of our seriously delinquent loans, based on UPB. However, borrowers are free to obtain second lien
financing after origination and we are not entitled to receive notification when a borrower does so. Therefore, it is likely
that additional borrowers have post-origination second lien mortgages.

Single-Family Mortgage Product Types
      Product mix affects the credit risk profile of our total mortgage portfolio. The primary mortgage products in our
single-family credit guarantee portfolio are first lien, fixed-rate mortgage loans. In general, 15-year amortizing fixed-rate
mortgages exhibit the lowest default rate among the types of mortgage loans we securitize and purchase, due to the
accelerated rate of principal amortization on these mortgages and the credit profiles of borrowers who seek and qualify for
them. In a rising interest rate environment, balloon/reset and ARM borrowers typically default at a higher rate than fixed-
rate borrowers. However, during recent years, when interest rates have generally declined, our delinquency and default
rates on adjustable-rate and balloon/reset mortgage loans on a relative basis have been as high as, or higher than, fixed-
rate loans because these borrowers are also susceptible to declining housing and economic conditions and/or had other
higher-risk characteristics. Interest-only and option ARM loans are higher-risk mortgage products based on the features of
these types of loans. Interest-only loans feature an increase in the monthly payment at the date of first reset (i.e., when the
monthly payment begins to include principal), while option ARMs feature initial periods during which the borrower has
various options as to the amount of each monthly payment, until a specified date, when the terms are recast. See “Other
Categories of Single-Family Mortgage Loans” below for additional information on higher-risk mortgages in our single-
family credit guarantee portfolio.
     In recent years, including 2011, we experienced a high volume of loan modifications, as troubled borrowers were
able to take advantage of the various programs that we offered. The majority of our loan modifications result in new
terms that include fixed interest rates after modification. However, our HAMP loan modifications result in an initial
interest rate that subsequently adjusts to a new rate that is fixed for the remaining life of the loan. We have classified
these loans as fixed-rate products for presentation within this Form 10-K and elsewhere in our reporting even though they
have a rate adjustment provision because the change in rate is determined at the time of modification rather than at a
future date.
     The following paragraphs provide information on the interest-only, option ARM, adjustable-rate, and conforming
jumbo loans in our single-family credit guarantee portfolio. Interest-only and option ARM loans have experienced
significantly higher serious delinquency rates than fixed-rate amortizing mortgage products.
                                                             144                                                 Freddie Mac
Interest-Only Loans
     Interest-only loans have an initial period during which the borrower pays only interest, and at a specified date the
monthly payment increases to begin reflecting repayment of principal. Interest-only loans represented approximately 4%
and 5% of the UPB of our single-family credit guarantee portfolio at December 31, 2011 and December 31, 2010,
respectively. We purchased a limited number of interest-only loans after 2008 and fully discontinued purchasing such
loans on September 1, 2010.
     The table below presents information for single-family mortgage loans in our single-family credit guarantee portfolio,
excluding Other Guarantee Transactions, at December 31, 2011 that contain interest-only payment terms. The reported
balances in the table below are aggregated by interest-only loan product type and categorized by the year in which the
loan begins to require payments of principal. At December 31, 2011, approximately 11% of these interest-only loans are
scheduled to begin requiring payments of principal in 2012 or 2013. The timing of the actual change in payment terms
may differ from those presented due to a number of factors, including refinancing.

Table 46 — Single-Family Loans Scheduled Payment Change to Include Principal by Year at December 31, 2011(1)
                                                                                                                                                                                                                                                                                                               2017 and
                                                                                                                                 2011 and Prior                                      2012                        2013                        2014         2015                                       2016       Beyond       Total
                                                                                                                                                                                                                                             (in millions)
ARM/interest-only . . . . . . . . . . . . . . . . . . . . . . . .                                                                        $13,002                                 $4,725                      $3,498                      $1,673                      $4,207                      $7,400        $19,526     $54,031
Fixed/interest-only . . . . . . . . . . . . . . . . . . . . . . . .                                                                           —                                      —                           —                           15                         377                       2,229         15,321      17,942
  Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                  $13,002                                 $4,725                      $3,498                      $1,688                      $4,584                      $9,629        $34,847     $71,973

(1) Based on the UPBs of mortgage products that contain interest-only provisions and that begin amortization of principal in each of the years shown.
    These reported balances are based on the UPB of the underlying mortgage loans and do not reflect the publicly-available security balances we use to
    report the composition of our PCs and REMICs and Other Structured Securities. Excludes: (a) mortgage loans underlying Other Guarantee
    Transactions; and (b) any mortgage loans which completed a modification before the end of the respective period and for which the terms of the
    loan were changed to an amortizing loan product.

      The table below presents the trend of serious delinquency information for single-family interest-only mortgage loans
in our single-family credit guarantee portfolio, excluding Other Guarantee Transactions, categorized by the year in which
the loan begins to require payments of principal. Loans where the year of payment change is 2011 or prior have already
changed to require payments of principal as of December 31, 2011; loans where the year of payment change is 2012 or
later still require only payments of interest as of December 31, 2011 and will not require payments of principal until a
future period.

Table 47 — Serious Delinquency Rates by Year of Payment Change to Include Principal(1)
                                                                                                                                                                                                                                                                                                               As of December 31,
Year of payment change:                                                                                                                                                                                                                                                                                     2011      2010     2009

2009   and prior     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 7.19% 8.66%        10.34%
2010   .......       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 10.38 12.73        10.68
2011   .......       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 18.96 19.65        16.95
2012   and after .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 18.63 19.11        18.49
(1) Based on loans remaining in the single-family guarantee portfolio as of December 31, 2011, 2010, and 2009, rather than all loans guaranteed by us
    and originated in the respective year. Excludes mortgage loans which completed a modification before the end of the respective period and for which
    the terms of the loan were changed to an amortizing loan product.

     As shown in the table above, the serious delinquency rates of interest-only loans that experienced a change in
payment to include principal during the last three years were not significantly impacted in the year the loan began the
amortization of principal. We believe that the higher serious delinquency rates for interest-only loans with payment
changes in 2010 and after (compared to those interest-only loans with payment changes in 2009 and prior) reflect that
those borrowers have been more negatively impacted by the ongoing adverse economic conditions, including declines in
home prices, than interest-only loans that experienced payment changes in earlier years.
     In recent years, interest-only loans experienced high serious delinquency rates well before reaching the dates at
which the loans begin to require amortization of principal. We believe that interest-only loan performance during the last
three years was more adversely affected by changes in employment, home prices, and other regional and macro-economic
conditions, than the increase in the borrower’s monthly payment (when the loans begin to require payments of principal).
In addition, a number of these loans were categorized as Alt-A, due to reduced documentation standards at the time of
loan origination. The overall serious delinquency rate for all interest-only loans in our single-family credit guarantee
portfolio was 17.6% as of December 31, 2011. Approximately 82% of all interest-only loans in our single-family credit
guarantee portfolio had not yet begun amortization of principal and 69% of all interest-only loans in our single-family
credit guarantee portfolio had current LTV ratios greater than 100% as of December 31, 2011. Since a substantial portion
                                                                                                                                                                         145                                                                                                                                        Freddie Mac
of these loans were originated in 2005 through 2008 and are located in geographical areas that have been most impacted
by declines in home prices since 2006, we believe that the serious delinquency rate for interest-only loans will remain
high in 2012.

Option ARM Loans
     Most option ARM loans have initial periods during which the borrower has various options as to the amount of each
monthly payment, until a specified date, when the terms are recast. At both December 31, 2011 and December 31, 2010,
option ARM loans represented less than 1% of the UPB of our single-family credit guarantee portfolio. Included in this
exposure was $7.3 billion and $8.4 billion of option ARM securities underlying certain of our Other Guarantee
Transactions at December 31, 2011 and December 31, 2010, respectively. While we have not categorized these option
ARM securities as either subprime or Alt-A securities for presentation within this Form 10-K and elsewhere in our
reporting, they could exhibit similar credit performance to collateral identified as subprime or Alt-A. We have not
purchased option ARM loans in our single-family credit guarantee portfolio since 2007. For information on our exposure
to option ARM loans through our holdings of non-agency mortgage-related securities, see “CONSOLIDATED BALANCE
SHEETS ANALYSIS — Investments in Securities.”

Adjustable-Rate Mortgage Loans
     The table below presents information for single-family mortgage loans in our single-family credit guarantee portfolio,
excluding Other Guarantee Transactions, at December 31, 2011 that contain adjustable payment terms. The reported
balances in the table below are aggregated by product type and categorized by year of the next scheduled contractual reset
date. At December 31, 2011, approximately 59% of these loans have interest rates that are scheduled to reset in 2012 or
2013. The timing of the actual reset dates may differ from those presented due to a number of factors, including
prepayments or exercising of provisions within the terms of the mortgage (certain of which could delay or accelerate the
timing of the reset date).

Table 48 — Single-Family Scheduled Adjustable-Rate Resets by Year at December 31, 2011(1)
                                                                                                                                                                 2012                            2013                         2014                         2015                              2016           Thereafter     Total
                                                                                                                                                                                                                                                         (in millions)
ARMs/amortizing . . .                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $29,540                         $ 2,557                         $2,103                      $ 8,329                     $14,802                $12,838      $ 70,169
ARMs/interest-only(2)                    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        33,650                           7,825                          3,611                        2,805                       2,531                  3,609        54,031
Balloon/resets . . . . . .               .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           384                              62                             11                            9                           1                      2           468
  Total . . . . . . . . . .              .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       $63,574                         $10,444                         $5,725                      $11,143                     $17,333                $16,449      $124,668

(1) Based on the UPBs of mortgage products that contain adjustable-rate interest provisions and are scheduled to reset during the periods specified
    above. These reported balances are based on the UPB of the underlying mortgage loans and do not reflect the publicly-available security balances
    we use to report the composition of our PCs and REMICs and Other Structured Securities. Excludes: (a) mortgage loans underlying Other Guarantee
    Transactions since rate reset information is not available to us for these loans; and (b) any amortizing ARM loans which completed a modification
    before the end of the respective period and for which the terms of the loan were changed to a fixed-rate loan product.
(2) Reflects the UPB of interest-only loans that reset in each of the years shown. We report loans in the interest-only category if their original terms
    include interest-only provisions for a pre-determined period of time before the monthly payment changes to include amortization of principal.
    Includes $13.0 billion of loans that were interest-only at origination that have converted to include amortization of principal as of December 31,
    2011.

     The table below presents serious delinquency information for single-family adjustable-rate mortgage loans in our
single-family credit guarantee portfolio, excluding Other Guarantee Transactions, categorized by the year in which the
loan first had an interest rate reset. Loans where the year of first interest rate reset is 2011 or prior have already had one
or more interest rate resets as of December 31, 2011; loans where the year of first interest rate reset is 2012 or later have
not yet had an interest rate reset as of December 31, 2011 and will not have an interest rate reset until a future period.

Table 49 — Serious Delinquency Rates by Year of First Rate Reset(1)
                                                                                                                                                                                                                                                                                                              As of December 31,
Year of payment change:                                                                                                                                                                                                                                                                                    2011      2010     2009

2009   and prior     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 3.48% 3.70% 4.45%
2010   .......       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 7.63   9.90  8.38
2011   .......       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 17.50 18.01 17.31
2012   and after .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   . 10.16 13.24 14.62
(1) Based on loans remaining in the single-family credit guarantee portfolio as of December 31, 2011, 2010, and 2009, rather than all loans guaranteed
    by us and originated in the respective year. Excludes mortgage loans which completed a modification before the end of the respective period and for
    which the terms of the loan were changed to a fixed-rate loan product.

     As shown in the table above, the trend in serious delinquency rates of adjustable-rate loans that experienced an
interest rate reset during the last three years has not been significantly impacted by the change in interest rate of the loan.
                                                                                                                                                                         146                                                                                                                                       Freddie Mac
Except for interest-only loans that began to amortize at the reset date, there were not significant increases to the
borrowers’ payments when these loans reached their first reset dates because market interest rates have generally declined
in recent years. Interest-only loans are a higher-risk mortgage product, which feature an increase in the monthly payment
at the date of first reset which is not solely related to the contractual interest rate (i.e., when the monthly payment begins
to include principal). In recent years, ARM loans have experienced high serious delinquency rates well before reaching
dates at which the loans have reached their first rate reset. We believe that ARM loan performance during the last three
years has been more adversely affected by changes in employment, home prices, and other regional and macro-economic
conditions, than by changes in the interest rates of the loans. See “RISK FACTORS — Competitive and Market Risks —
Changes in interest rates could negatively impact our results of operations, stockholders’ equity (deficit) and fair value of
net assets” for additional information. Since a substantial portion of ARM loans were originated in 2005 through 2008
and are located in geographical areas that have been most impacted by declines in home prices since 2006, we believe
that the serious delinquency rate for ARM loans will continue to remain high in 2012.

Conforming Jumbo Loans
     We purchased $27.7 billion and $23.9 billion of conforming jumbo loans during the years ended December 31, 2011
and 2010, respectively. The UPB of conforming jumbo loans in our single-family credit guarantee portfolio as of
December 31, 2011 and December 31, 2010 was $49.8 billion and $37.8 billion, respectively. The average size of these
loans was approximately $545,000 and $548,000 at December 31, 2011 and December 31, 2010, respectively. See
“BUSINESS — Regulation and Supervision — Legislative and Regulatory Developments” for further information on the
conforming loan limits.

Other Categories of Single-Family Mortgage Loans
     While we have classified certain loans as subprime or Alt-A for purposes of the discussion below and elsewhere in
this Form 10-K, there is no universally accepted definition of subprime or Alt-A, and our classification of such loans may
differ from those used by other companies. For example, some financial institutions may use FICO scores to delineate
certain residential mortgages as subprime. In addition, we do not rely primarily on these loan classifications to evaluate
the credit risk exposure relating to such loans in our single-family credit guarantee portfolio. For a definition of the
subprime and Alt-A single-family loans and securities in this Form 10-K, see “GLOSSARY.”

Subprime Loans
      Participants in the mortgage market may characterize single-family loans based upon their overall credit quality at
the time of origination, generally considering them to be prime or subprime. While we have not historically characterized
the loans in our single-family credit guarantee portfolio as either prime or subprime, we do monitor the amount of loans
we have guaranteed with characteristics that indicate a higher degree of credit risk (see “Higher Risk Loans in the Single-
Family Credit Guarantee Portfolio” and “Table 57 — Single-Family Credit Guarantee Portfolio by Attribute
Combinations” for further information). In addition, we estimate that approximately $2.3 billion and $2.5 billion of
security collateral underlying our Other Guarantee Transactions at December 31, 2011 and December 31, 2010,
respectively, were identified as subprime based on information provided to us when we entered into these transactions.
     We also categorize our investments in non-agency mortgage-related securities as subprime if they were identified as
such based on information provided to us when we entered into these transactions. At December 31, 2011 and
December 31, 2010, we held $49.0 billion and $54.2 billion, respectively, in UPB of non-agency mortgage-related
securities backed by subprime loans. These securities were structured to provide credit enhancements, and 7% and 10% of
these securities were investment grade at December 31, 2011 and December 31, 2010, respectively. The credit
performance of loans underlying these securities deteriorated significantly beginning in 2008. For more information on our
exposure to subprime mortgage loans through our investments in non-agency mortgage-related securities see
“CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities.”

Alt-A Loans
     Although there is no universally accepted definition of Alt-A, many mortgage market participants classify single-
family loans with credit characteristics that range between their prime and subprime categories as Alt-A because these
loans have a combination of characteristics of each category, may be underwritten with lower or alternative income or
asset documentation requirements compared to a full documentation mortgage loan, or both. The UPB of Alt-A loans in
our single-family credit guarantee portfolio declined to $94.3 billion as of December 31, 2011 from $115.5 billion as of
December 31, 2010. The UPB of our Alt-A loans declined in 2011 primarily due to refinancing into other mortgage
products, foreclosure transfers, and other liquidation events. As of December 31, 2011, for Alt-A loans in our single-
                                                             147                                                 Freddie Mac
family credit guarantee portfolio, the average FICO score at origination was 718. Although Alt-A mortgage loans
comprised approximately 5% of our single-family credit guarantee portfolio as of December 31, 2011, these loans
represented approximately 28% of our credit losses during 2011.
     During the first quarter of 2011, we identified approximately $0.6 billion in UPB of single-family loans underlying
certain Other Guarantee Transactions that had been previously reported in both the Alt-A and subprime categories.
Commencing March 31, 2011, we no longer report these loans as Alt-A (but continue to report them as subprime) and we
revised the prior periods to conform to the current period presentation.
     We did not purchase any new single-family Alt-A mortgage loans in our single-family credit guarantee portfolio
during 2011. Although we discontinued new purchases of mortgage loans with lower documentation standards for assets
or income beginning March 1, 2009 (or later, as our customers’ contracts permitted), we continued to purchase certain
amounts of these mortgages in cases where the loan was either: (a) purchased pursuant to a previously issued other
guarantee commitment; (b) part of our relief refinance mortgage initiative; or (c) in another refinance mortgage initiative
and the pre-existing mortgage (including Alt-A loans) was originated under less than full documentation standards.
However, in the event we purchase a refinance mortgage in one of these programs and the original loan had been
previously identified as Alt-A, such refinance loan may no longer be categorized or reported as an Alt-A mortgage in this
Form 10-K and our other financial reports because the new refinance loan replacing the original loan would not be
identified by the seller/servicer as an Alt-A loan. As a result, our reported Alt-A balances may be lower than would
otherwise be the case had such refinancing not occurred. From the time the relief refinance initiative began in 2009 to
December 31, 2011, we purchased approximately $15.3 billion of relief refinance mortgages that were previously
categorized as Alt-A loans in our portfolio, including $5.1 billion during 2011.
     We also hold investments in non-agency mortgage-related securities backed by single-family Alt-A loans. At
December 31, 2011 and December 31, 2010, we held investments of $16.8 billion and $18.8 billion, respectively, of non-
agency mortgage-related securities backed by Alt-A and other mortgage loans and 15% and 22%, respectively, of these
securities were categorized as investment grade. The credit performance of loans underlying these securities deteriorated
significantly since the beginning of 2008 and continued to deteriorate during 2011. We categorize our investments in non-
agency mortgage-related securities as Alt-A if the securities were identified as such based on information provided to us
when we entered into these transactions. For more information on our exposure to Alt-A mortgage loans through our
investments in non-agency mortgage-related securities see “CONSOLIDATED BALANCE SHEETS ANALYSIS —
Investments in Securities.”

Higher-Risk Loans in the Single-Family Credit Guarantee Portfolio
     The table below presents information about certain categories of single-family mortgage loans within our single-
family credit guarantee portfolio that we believe have certain higher-risk characteristics. These loans include categories
based on product type and borrower characteristics present at origination. The table includes a presentation of each higher
risk category in isolation. A single loan may fall within more than one category (for example, an interest-only loan may
also have an original LTV ratio greater than 90%). Mortgage loans with higher LTV ratios have a higher risk of default,
especially during housing and economic downturns, such as the one the U.S. has experienced since 2007.




                                                            148                                                Freddie Mac
Table 50 — Certain Higher-Risk Categories in the Single-Family Credit Guarantee Portfolio(1)
                                                                                                                                                               As of December 31, 2011
                                                                                                                                                                                              Serious
                                                                                                                                                             Estimated        Percentage    Delinquency
                                                                                                                                                   UPB     Current LTV(2)     Modified(3)     Rate(4)
                                                                                                                                                                  (dollars in billions)
Loans with one or more specified characteristics . . . . . . . . . . . . . . . . .                 . . . . . . . . . . . . $342.9                               105%              7.2%          9.3%
Categories (individual characteristics):
  Alt-A(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .    94.3        107               8.8          11.9
  Interest-only(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .    72.0        120               0.2          17.6
  Option ARM(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .     8.4        119               5.5          20.5
  Original LTV ratio greater than 90%, non-relief refinance mortgages(8)                           .   .   .   .   .   .   .   .   .   .   .   .   107.9        108               8.1           8.5
  Original LTV ratio greater than 90%, relief refinance mortgages(8) . . .                         .   .   .   .   .   .   .   .   .   .   .   .    59.3        104               0.1           1.3
  Lower FICO scores at origination (less than 620)(8) . . . . . . . . . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .    55.6         93              13.4          12.9

                                                                                                                                                               As of December 31, 2010
                                                                                                                                                                                              Serious
                                                                                                                                                             Estimated        Percentage    Delinquency
                                                                                                                                                   UPB     Current LTV(2)     Modified(3)     Rate(4)
                                                                                                                                                                  (dollars in billions)
Loans with one or more specified characteristics . . . . . . . . . . . . . . . . .                 . . . . . . . . . . . . $368.8                               100%              5.5%         10.3%
Categories (individual characteristics):
  Alt-A(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   115.5         99               5.7          12.2
  Interest-only(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     .   .   .   .   .   .   .   .   .   .   .   .    95.4        112               0.5          18.4
  Option ARM(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .     9.4        115               3.1          21.2
  Original LTV ratio greater than 90%, non-relief refinance mortgages(8)                           .   .   .   .   .   .   .   .   .   .   .   .   117.8        105               6.3           9.1
  Original LTV ratio greater than 90%, relief refinance mortgages(8) . . .                         .   .   .   .   .   .   .   .   .   .   .   .    36.5        101               0.1           0.7
  Lower FICO scores at origination (less than 620)(8) . . . . . . . . . . . . .                    .   .   .   .   .   .   .   .   .   .   .   .    61.2         89              10.4          13.9
(1) Categories are not additive and a single loan may be included in multiple categories if more than one characteristic is associated with the loan.
    Loans with a combination of these characteristics will have an even higher risk of default than those with an individual characteristic.
(2) See endnote (5) to “Table 45 — Characteristics of the Single-Family Credit Guarantee Portfolio” for information on our calculation of current LTV
    ratios.
(3) Represents the percentage of loans based on loan count in our single-family credit guarantee portfolio that have been modified under agreement with
    the borrower, including those with no changes in the interest rate or maturity date, but where past due amounts are added to the outstanding
    principal balance of the loan. Excludes loans underlying certain Other Guarantee Transactions for which data was not available.
(4) See “Portfolio Management Activities-Credit Performance-Delinquencies” for further information about our reported serious delinquency rates.
(5) Loans within the Alt-A category continue to remain in that category following modification, even though the borrower may have provided full
    documentation of assets and income to complete the modification.
(6) The percentages of interest-only loans which have been modified at period end reflect that a number of these loans have not yet been assigned to
    their new product category (post-modification), primarily due to delays in processing.
(7) Loans within the option ARM category continue to remain in that category following modification, even though the modified loan no longer
    provides for optional payment provisions.
(8) See endnotes (4) and (7) to “Table 45 — Characteristics of the Single-Family Credit Guarantee Portfolio” for information on our calculation of
    original LTV ratios and our use of FICO scores, respectively.

     Loans with one or more of the above characteristics comprised approximately 20% of our single-family credit
guarantee portfolio as of both December 31, 2011 and 2010. The total UPB of loans in our single-family credit guarantee
portfolio with one or more of these characteristics declined approximately 7% to $343 billion as of December 31, 2011
from $369 billion as of December 31, 2010. This decline was principally due to liquidations resulting from prepayments,
refinancing activity, and liquidations resulting from foreclosure events and foreclosure alternatives, but was partially offset
by increases in loans with original LTV ratios greater than 90% due to our relief refinance mortgage activity in 2011. The
serious delinquency rates associated with these loans declined to 9.3% as of December 31, 2011 from 10.3% as of
December 31, 2010.

Credit Enhancements
     The portfolio information below excludes our holdings of non-Freddie Mac mortgage-related securities. See
“CONSOLIDATED BALANCE SHEETS ANALYSIS — Investments in Securities — Mortgage-Related Securities” for
credit enhancement and other information about our investments in non-Freddie Mac mortgage-related securities.
     Our charter requires that single-family mortgages with LTV ratios above 80% at the time of purchase be covered by
specified credit enhancements or participation interests. However, as discussed below, under HARP, we allow eligible
borrowers who have mortgages with high current LTV ratios to refinance their mortgages without obtaining new mortgage
insurance in excess of what was already in place. Primary mortgage insurance is the most prevalent type of credit
enhancement protecting our single-family credit guarantee portfolio, and is typically provided on a loan-level basis. In
addition, for some mortgage loans, we elect to share the default risk by transferring a portion of that risk to various third
parties through a variety of other credit enhancements.
    At December 31, 2011 and December 31, 2010, our single-family credit-enhanced mortgages represented 14% and
15%, respectively, of our single-family credit guarantee portfolio, excluding those backing Ginnie Mae Certificates and
                                                                                           149                                                                                           Freddie Mac
HFA bonds guaranteed by us under the HFA initiative. Freddie Mac securities backed by Ginnie Mae Certificates and
HFA bonds guaranteed by us under the HFA initiative are excluded because we consider the incremental credit risk to
which we are exposed to be insignificant.
      We had recoveries (excluding reimbursements for our expenses) of $2.8 billion and $3.4 billion that reduced our
charge-offs of single-family loans during the years ended December 31, 2011 and 2010, respectively. These amounts
include $1.8 billion and $2.1 billion during the years ended December 31, 2011 and 2010, respectively, in recoveries
associated with our primary and pool mortgage insurance policies and other credit enhancements. We had additional
recoveries from credit enhancements that provided reimbursement for and reduced our expenses by $0.3 billion during
both 2011 and 2010. During 2011 and 2010, the credit enhancement coverage for our single-family loan purchases was
lower than in periods before 2009 and earlier, primarily as a result of high refinance activity. Refinance loans (other than
relief refinance mortgages) typically have lower LTV ratios, and are more likely to have an LTV ratio below 80% and not
require credit protection as specified in our charter. In addition, we have been purchasing significant amounts of relief
refinance mortgages. These mortgages allow for the refinance of existing loans guaranteed by us under terms such that we
may not have mortgage insurance for some or all of the UPB of the mortgage in excess of 80% of the value of the
property for certain of these loans.
     Our ability and desire to expand or reduce the portion of our total mortgage portfolio covered by credit
enhancements will depend on: (a) our evaluation of the credit quality of new business purchase opportunities; (b) the risk
profile of our portfolio; (c) the credit worthiness of potential counterparties; and (d) the future availability of effective
credit enhancements at prices that permit an attractive return. While the use of credit enhancements reduces our exposure
to mortgage credit risk, it increases our exposure to institutional credit risk. As guarantor, we remain responsible for the
payment of principal and interest if mortgage insurance or other credit enhancements do not provide full reimbursement
for covered losses. Our credit losses could increase if an entity that provides credit enhancement fails to fulfill its
obligation, as this would reduce the amount of our credit loss recoveries.
     Primary mortgage insurance is the most prevalent type of credit enhancement protecting our single-family credit
guarantee portfolio and is typically provided on a loan-level basis. Primary mortgage insurance transfers varying portions
of the credit risk associated with a mortgage to a third-party insurer. Generally, in order to file a claim under a primary
mortgage insurance policy, the insured loan must be in default and the borrower’s interest in the underlying property must
have been extinguished, such as through a foreclosure action. The mortgage insurer has a prescribed period of time within
which to process a claim and make a determination as to its validity and amount.
     Other prevalent types of credit enhancements that we use are lender recourse (under which we may require a lender
to repurchase a loan upon default) and indemnification agreements (under which we may require a lender to reimburse us
for credit losses realized on mortgages), as well as pool insurance. Pool insurance provides insurance on a pool of loans
up to a stated aggregate loss limit. In addition to a pool-level loss coverage limit, some pool insurance contracts may have
limits on coverage at the loan level. In certain instances, the cumulative losses we have incurred as of December 31, 2011
combined with our expectations of potential future claims may exceed the maximum limit of loss allowed by the policy.
     In order to file a claim under a pool insurance policy, we generally must have finalized the primary mortgage claim,
disposed of the foreclosed property, and quantified the net loss payable to us with respect to the insured loan to determine
the amount due under the pool insurance policy. Certain pool insurance policies have specified loss deductibles that must
be met before we are entitled to recover under the policy. We have institutional credit risk relating to the potential
insolvency or non-performance of mortgage insurers that insure mortgages we purchase or guarantee. See “Institutional
Credit Risk — Mortgage Insurers” for further discussion about pool insurance coverage and our mortgage loan insurers.
     Certain of our single-family Other Guarantee Transactions utilize subordinated security structures as a form of credit
enhancement. At December 31, 2011 and 2010, the UPB of single-family Other Guarantee Transactions with
subordination coverage at origination was $3.3 billion and $3.9 billion, and the subordination coverage on these securities
was $647 million and $825 million, respectively. At December 31, 2011 and 2010, the average serious delinquency rate
on single-family Other Guarantee Transactions with subordination coverage was 20.9% and 21.1%, respectively.
     See “NOTE 4: MORTGAGE LOANS AND LOAN LOSS RESERVES” for additional information about credit
protection and other forms of credit enhancements covering loans in our single-family credit guarantee portfolio as of
December 31, 2011 and December 31, 2010.

Other Credit Risk Management Activities
     To compensate us for higher levels of risk in some mortgage products, we may charge upfront delivery fees above a
base management and guarantee fee, which are calculated based on credit risk factors such as the mortgage product type,
                                                             150                                                 Freddie Mac
loan purpose, LTV ratio and other loan or borrower characteristics. We implemented several increases in delivery fees that
became effective in 2009 applicable to single-family mortgages with certain higher-risk loan characteristics. We
implemented additional delivery fee increases that become effective March 1, 2011 (or later, as outstanding contracts
permitted) for single-family loans with higher LTV ratios. These fee increases do not apply to relief refinance mortgages
with LTV ratios greater than 80% and with settlement dates on or after July 1, 2011. Given the uncertainty of the housing
market in recent years, during 2011 and 2010, we entered into arrangements with certain existing customers at their
renewal dates that allow us to change credit and pricing terms more quickly than in the past. In response to a July 2011
request from FHFA, we have incorporated into our agreements with single-family sellers the ability to change our
management and guarantee fees upon 90 days or less notice to sellers, if directed to do so by FHFA.
     On December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011.
Among its provisions, this new law directs FHFA to require Freddie Mac and Fannie Mae to increase guarantee fees by
no less than 10 basis points above the average guarantee fees charged in 2011 on single-family mortgage-backed
securities. For more information, see “BUSINESS — Regulation and Supervision — Legislative and Regulatory
Developments — Legislated Increase to Guarantee Fees.”

Single-Family Loan Workouts and the MHA Program
     Loan workout activities are a key component of our loss mitigation strategy for managing and resolving troubled
assets and lowering credit losses. Our loan workouts consist of: (a) forbearance agreements; (b) repayment plans; (c) loan
modifications; and (d) foreclosure alternatives (short sales or deed in lieu of foreclosure transactions). Our single-family
loss mitigation strategy emphasizes early intervention by servicers in delinquent mortgages and provides alternatives to
foreclosure. Other single-family loss mitigation activities include providing our single-family servicers with default
management tools designed to help them manage non-performing loans more effectively and to assist borrowers in
retaining home ownership where possible, or facilitate foreclosure alternatives when continued homeownership is not an
option. See “BUSINESS — Our Business Segments — Single-Family Guarantee Segment — Loss Mitigation and Loan
Workout Activities” for a general description of our loan workouts.
     Loan workouts are intended to reduce the number of delinquent mortgages that proceed to foreclosure and,
ultimately, mitigate our total credit losses by reducing or eliminating a portion of the costs related to foreclosed properties
and avoiding the additional credit losses that likely would be incurred in a REO sale. While we incur costs in the short
term to execute our loan workout initiatives, we believe that, overall, these initiatives could reduce our ultimate credit
losses over the long term.
     HAMP and our new non-HAMP standard loan modification are important components of our loan workout program
and have many similar features, including the initial incentive fees paid to servicers upon completion of a modification.
Both of these loan modification initiatives are intended to provide borrowers the opportunity to obtain more affordable
monthly payments and to reduce the number of delinquent mortgages that proceed to foreclosure and, ultimately, mitigate
our credit losses by reducing or eliminating a portion of the costs related to foreclosed properties. However, we cannot
currently estimate whether, or the extent to which, costs incurred in the near term from HAMP and our new non-HAMP
standard loan modification may be offset, if at all, by the prevention or reduction of potential future costs of serious
delinquencies and foreclosures.
     Our seller/servicers have a significant role in servicing loans in our single-family credit guarantee portfolio, which
includes an active role in our loss mitigation efforts. Therefore, a decline in their performance could impact the overall
quality of our credit performance (including through missed opportunities for mortgage modifications), which could
adversely affect our financial condition or results of operations and have significant impacts on our ability to mitigate
credit losses. The risk of such a decline in performance remains high. For more information, see “RISK FACTORS —
Competitive and Market Risks — We face the risk that seller/servicers may fail to perform their obligations to service
loans in our single-family and multifamily mortgage portfolios or that their servicing performance could decline.”
      We establish guidelines for our servicers to follow and provide them default management tools to use, in part, in
determining which type of loan workout would be expected to provide the best opportunity for minimizing our credit
losses. We require our single-family seller/servicers to first evaluate problem loans for a repayment or forbearance plan
before considering modification. If a borrower is not eligible for a modification, our seller/servicers pursue other workout
options before considering foreclosure. During 2011, we helped more than 208,000 borrowers either stay in their homes or
sell their properties and avoid foreclosures through our various workout programs, including HAMP, and we completed
approximately 122,000 foreclosures.
                                                             151                                                  Freddie Mac
     The MHA Program is designed to help in the housing recovery, promote liquidity and housing affordability, expand
foreclosure prevention efforts, and set market standards. Participation in the MHA Program is an integral part of our
mission of providing stability to the housing market. Through our participation in this program, we help borrowers
maintain home ownership. Some of the key initiatives of this program include HAMP and HARP, which are discussed
below.

Home Affordable Modification Program
     HAMP commits U.S. government, Freddie Mac and Fannie Mae funds to help eligible homeowners avoid
foreclosures and keep their homes through mortgage modifications, where possible. Under this program, we offer loan
modifications to financially struggling homeowners with mortgages on their primary residences that reduce the monthly
principal and interest payments on their mortgages. HAMP requires that each borrower complete a trial period during
which the borrower will make monthly payments based on the estimated amount of the modification payments. Trial
periods are required for at least three months. After the final trial-period payment is received by our servicer and the
borrower has provided necessary documentation, the borrower and servicer will enter into the modification. We bear the
costs of these activities, including the cost of any monthly payment reductions.
     Pursuant to the servicing alignment initiative, we changed some of the processes and procedures for our loans under
HAMP to match the new processes and procedures for the servicing alignment initiative. Certain other features of HAMP
include the following:
     • Under HAMP, the goal is to reduce the borrowers’ monthly mortgage payments to 31% of gross monthly income,
       which may be achieved through a combination of methods, including interest rate reductions, term extensions, and
       principal forbearance. Although HAMP contemplates that some servicers will also make use of principal reduction
       to achieve reduced payments for borrowers, we have only used forbearance and have not used principal reduction
       in modifying our loans.
     • For HAMP modifications with a trial period beginning on or after October 1, 2011, servicers are paid incentive
       fees on a tiered structure, ranging from $400 to $1,600, based on the severity of the delinquency at the start of the
       trial period. Prior to October 1, 2011, servicers were paid a $1,000 incentive fee when they modified a loan and an
       additional $500 incentive fee if the loan was current when it entered the trial period. In addition, servicers receive
       up to $1,000 for any modification that reduces a borrower’s monthly payment by 6% or more, in each of the first
       three years after the modification, as long as the modified loan remains current.
     • Borrowers whose loans are modified through HAMP accrue monthly incentive payments that are applied annually
       to reduce up to $1,000 of their principal per year, for five years, as long as they are making timely payments under
       the modified loan terms.
     • HAMP applies to loans originated on or before January 1, 2009.
      On January 27, 2012, Treasury announced enhancements to HAMP, including extending the end date to
December 31, 2013, expanding the program’s eligibility criteria for modifications, increasing incentives paid to investors
who engage in principal reduction, and extending to the GSEs the opportunity to receive investor incentives for principal
reduction. Treasury has not yet published details about the incentives that will be available to the GSEs. FHFA announced
that the GSEs will extend their use of HAMP until December 31, 2013, and continue to offer the standard modification
under the servicing alignment initiative. FHFA noted that Treasury’s expanded eligibility criteria for HAMP modifications
are consistent with our standard non-HAMP modification.
     FHFA announced that it has been asked to consider the newly available HAMP incentives for principal reduction.
FHFA previously released an analysis concluding that principal forgiveness does not provide benefits that are greater than
principal forbearance as a loss mitigation tool. FHFA stated that its assessment of the investor incentives now being
offered by Treasury will follow its previous analysis, including consideration of the eligible universe, operational costs to
implement such changes, and potential borrower incentive effects.




                                                             152                                                 Freddie Mac
    The table below presents the number of single-family loans that completed modification or were in trial periods
under HAMP as of December 31, 2011 and December 31, 2010.

Table 51 — Single-Family Home Affordable Modification Program Volume(1)
                                                                                                                 As of                               As of
                                                                                                           December 31, 2011                  December 31, 2010
                                                                                                             (2)                                 (2)
                                                                                                       Amount     Number of Loans      Amount         Number of Loans
                                                                                                                           (dollars in millions)
Completed HAMP modifications(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $33,681         152,519          $23,635         107,073
Loans in the HAMP trial period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $ 2,790          12,802          $ 4,905          22,352
(1) Based on information reported by our servicers to the MHA Program administrator.
(2) For loans in the HAMP trial period, this reflects the loan balance prior to modification. For completed HAMP modifications, the amount represents
    the balance of loans after modification under HAMP.
(3) Completed HAMP modifications are those where the borrower has made the last trial period payment, has provided the required documentation to
    the servicer and the modification has become effective. Amounts presented represent completed HAMP modifications with effective dates since our
    implementation of HAMP in 2009 through December 31, 2011 and December 31, 2010, respectively.

      As of December 31, 2011, the borrower’s monthly payment was reduced on average by an estimated $565, which
amounts to an average of $6,780 per year, and a total of $1.0 billion in annual reductions for all of our completed HAMP
modifications (these amounts are calculated by multiplying the number of completed modifications by the average
reduction in monthly payment, and have not been adjusted to reflect the actual performance of the loans following
modification). Except in limited instances, each borrower’s reduced payment will remain in effect for a minimum of five
years, and borrowers whose interest rates were adjusted below market levels will have their interest rate and payment
gradually increased after the fifth year to a rate consistent with the market rate at the time of modification. We bear the
cost associated with the borrowers’ payment reductions. Although mortgage investors under the MHA Program are
entitled to certain subsidies from Treasury for reducing the borrowers’ monthly payments from 38% to 31% of the
borrower’s income, we do not receive such subsidies on modified mortgages owned or guaranteed by us.
     A standard trial period plan is three months in duration. Our servicers are permitted to add an interim month, which
will be reported as a fourth trial period month. In addition, our servicers are authorized to extend a trial period for up to
an additional two months when the borrower is in bankruptcy in order to provide additional time to have the mortgage
removed from the bankruptcy plan, which is a pre-requisite to a modification under HAMP. The number of our loans in
the HAMP trial period declined to 12,802 as of December 31, 2011 from 22,352 as of December 31, 2010. A large
number of borrowers entered into HAMP trial period plans when the program was initially introduced in 2009.
Significantly fewer new borrowers entered into HAMP trial period plans beginning in the second half of 2010, when we
changed the income documentation requirements as discussed below. We expect fewer borrowers will initiate HAMP
modification during 2012 than 2011, because a large number of the delinquent borrowers that were eligible for the
program have already completed the trial period or attempted to do so, but failed.
     To address documentation issues experienced when the program began, guidelines for HAMP provide that, beginning
with trial periods that became effective on or after June 1, 2010, borrowers must provide income documentation before
entering into a HAMP trial period. Prior to the June 1, 2010 changes to HAMP, we experienced approximately a 38%
modification completion rate under the program. Given the changes made to the program effective June 1, 2010, we have
since experienced a modification completion rate in excess of 80%. When a borrower’s HAMP trial period is cancelled,
the loan is considered for our other workout activities.
     Approximately 40% of our loans in the HAMP trial period as of December 31, 2011 have been in the trial period for
more than the minimum duration of three months. Based on information provided by the program administrator, the
average length of the trial period for loans in the program as of December 31, 2011 was five months. For more
information on our redefault rates on these loans, see “Table 54 — Reperformance Rates of Modified Single-Family
Loans.”
    HAMP is one modification option for single-family loans, but we also have completed a large volume of
modifications through our non-HAMP loan modification initiatives.
      The costs we incur related to HAMP have been, and will likely continue to be, significant for the following reasons:
      • Except for certain Other Guarantee Transactions and loans underlying our other guarantee commitments, we bear
        the full cost of the monthly payment reductions related to modifications of loans we own or guarantee and all
        servicer and borrower incentives, and we will not receive a reimbursement of these costs from Treasury. We paid
        $184 million of servicer incentives during 2011, as compared to $178 million of such incentives during 2010. As
        of December 31, 2011, we accrued $77 million for both initial and recurring servicer incentives not yet due. We
        paid $111 million of borrower incentives during 2011, as compared to $64 million of these incentives during 2010.
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       As of December 31, 2011, we accrued $60 million for borrower incentives not yet due. We also have the potential
       to incur additional servicer incentives and borrower incentives as long as the borrower remains current on a loan
       modified under HAMP.
    • Under HAMP, we typically provide concessions to borrowers, which generally include interest rate reductions and
      often also provide for forbearance (but not forgiveness) of principal.
    • Some borrowers will fail to complete the HAMP trial period and others will default on their HAMP modified
      loans. For those borrowers who redefault or who do not complete the trial period and do not qualify for another
      loan workout, HAMP will have delayed the resolution of the loans through the foreclosure process. If home prices
      decline while these events take place, such delay in the foreclosure process may increase the losses we recognize
      on these loans, to the extent the prices we ultimately receive for the foreclosed properties are less than the prices
      we could have received had we foreclosed upon the properties earlier.
    • Non-GSE mortgages modified under HAMP include mortgages backing our investments in non-agency mortgage-
      related securities. Such modifications reduce the monthly payments due from affected borrowers, and thus reduce
      the payments we receive on these securities (to the extent the payment reductions have not been absorbed by
      subordinated investors or by other credit enhancement).

Servicing Alignment Initiative and Non-HAMP Modifications
     In February 2011, FHFA directed Freddie Mac and Fannie Mae to develop consistent requirements, policies, and
processes for the servicing of non-performing loans. This directive was designed to create greater consistency in servicing
practices and to build on the best practices of each of the GSEs. In April 2011, pursuant to this directive, FHFA
announced a new set of aligned standards (known as the servicing alignment initiative) for servicing non-performing loans
owned or guaranteed by Freddie Mac and Fannie Mae that are designed to help servicers do a better job of
communicating and working with troubled borrowers and to bring greater accountability to the servicing industry. We
announced our detailed requirements for this initiative on June 30, 2011, with implementation beginning for loans that
were delinquent as of October 1, 2011. These standards provide for earlier and more frequent communication with
delinquent borrowers, consistent requirements for collecting documents from borrowers, consistent timelines for
responding to borrowers, and consistent timelines for processing foreclosures. These standards are expected to result in
greater alignment of servicer processes for both HAMP and most non-HAMP workouts.
     Under these new servicing standards, we will pay incentives to servicers that exceed certain performance standards
with respect to servicing delinquent loans. We will also assess compensatory fees from servicers if they do not achieve a
minimum performance benchmark with respect to servicing delinquent loans. These incentives may result in our payment
of increased fees to our seller/servicers, the cost of which may be at least partially mitigated by the compensatory fees
paid to us by our servicers that do not perform as required.
      As part of the servicing alignment initiative, we began implementation of a new non-HAMP standard loan
modification initiative. This new standard modification replaced our previous non-HAMP modification initiative beginning
January 1, 2012. The new standard modification requires a three-month trial period. Servicers were permitted to begin
offering standard modification trial period plans with effective dates on or after October 1, 2011. A modest number of
borrowers entered trial periods under our standard non-HAMP modification initiative as of December 31, 2011. We expect
to experience a temporary decline in completed modification volume in the first half of 2012, below what otherwise
would be expected, as servicers transition borrowers to the new standard modification initiative and borrowers complete
the trial period. This new standard modification program is expected to result in a higher volume of modifications where
we partially forbear (but do not forgive) principal until the borrower sells the home or refinances or pays off the
mortgage. The standard modification provides an extension of the loan’s term to 480 months. In addition, the new
modification initiative currently provides for a standard modified interest rate of 5% (though FHFA could change this in
the future). This new initiative also provides for a servicer incentive fee schedule for non-HAMP modifications,
comparable to the HAMP servicer incentive fee structure, effective October 1, 2011. The incentive fees are intended to
provide greater incentives to our servicers to modify loans earlier in the delinquency, which may cause the servicer
incentive costs associated with our modification activities to increase in the future. The standard modification does not
include borrower incentive payments or recurring servicer incentive fees after the initial servicer incentive payment.
      We expect that the costs we incur related to our new non-HAMP standard loan modifications will likely be
significant. These costs will be similar to those described above under “Home Affordable Modification Program” relating
to: (a) bearing the full cost of monthly payment reductions; (b) paying initial incentive fees to servicers; (c) providing
concessions to borrowers; and (d) the potential for delaying the resolution of loans through the foreclosure process. While
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we incur costs in the short-term to execute our non-HAMP standard modifications, we believe that, overall, our non-
HAMP standard modification could reduce our ultimate credit losses over the long-term.

Home Affordable Refinance Program and Relief Refinance Mortgage Initiative
     HARP gives eligible homeowners (whose monthly payments are current) with existing loans that are owned or
guaranteed by us or Fannie Mae an opportunity to refinance into loans with more affordable monthly payments and/or
fixed-rate terms. Through December 2011, under HARP, eligible borrowers who had mortgages with current LTV ratios
above 80% and up to 125% were allowed to refinance their mortgages without obtaining new mortgage insurance in
excess of what is already in place. Beginning December 2011, HARP was expanded to allow eligible borrowers who have
mortgages with current LTV ratios above 125% to refinance under the program.
      Our underwriting procedures for relief refinance mortgages are limited in many cases, and such procedures generally
do not include all of the changes in underwriting standards we have implemented in the last several years. As a result,
relief refinance mortgages generally reflect many of the credit risk attributes of the original loans. However, borrower
participation in our relief refinance mortgage initiative may help reduce our exposure to credit risk in cases where
borrower payments under their mortgages are reduced, thereby strengthening the borrower’s potential to make their
mortgage payments.
      Part of the relief refinance mortgage initiative is our implementation of HARP, and relief refinance options are also
available for certain non-HARP loans. HARP is targeted at borrowers with current LTV ratios above 80%; however, our
relief refinance initiative also allows borrowers with LTV ratios of 80% and below to participate. Over time, relief
refinance mortgages with LTV ratios above 80% (HARP loans) may not perform as well as other refinance mortgages
because of the continued high LTV ratios of these loans. Our relief refinance initiative is only for qualifying mortgage
loans that we already hold or guarantee. We continue to bear the credit risk for refinanced loans under this program, to
the extent that such risk is not covered by existing mortgage insurance or other existing credit enhancements. The
implementation of the relief refinance mortgage initiative resulted in a higher volume of purchases than we would expect
in the absence of the program.
    The table below presents the composition of our purchases of refinanced single-family loans during the year ended
December 31, 2011 and 2010.

Table 52 — Single-Family Refinance Loan Volume(1)
                                                                                                                        Year Ended December 31, 2011                  Year Ended December 31, 2010
                                                                                                                     Amount    Number of Loans     Percent      Amount       Number of Loans     Percent
                                                                                                                                                   (dollars in millions)
Relief refinance mortgages:
  Above 105% LTV ratio . . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 8,174           36,307           3.1% $ 3,977               16,667          1.1%
  Above 80% to 105% LTV ratio            .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     31,566         148,643          12.6    43,906             192,650         13.1
  80% and below LTV ratio . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .     42,304         267,633          22.6    57,766             323,851         22.0
Total relief refinance mortgages .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   $ 82,044         452,583          38.3% $105,649             533,168         36.2%
Total refinance loan volume(2) . . . . . . . . . . . . . . . . . . . . . .                                           $246,913       1,183,304        100.0% $303,060            1,470,786        100.0%

(1) Consists of all single-family refinance mortgage